TSKHINVALI, U.S.S.R. -- While the drama of the Soviet crackdown in the Baltic states was attracting world attention, a small but vicious ethnic war in the Soviet republic of Georgia has claimed more than 20 lives and up to 150 wounded.

The dispute between Georgia and its Ossetian minority is as old as the Soviet Union. Since the collapse of the Russian Empire in 1917, the Ossetians, who number only about 200,000 of Georgia's 5.5 million, have looked to Soviet power for protection against the majority's nationalism.

But Georgian feelings have been raised to near hysteria by the suspicion that Moscow may have encouraged the current conflict to use it in forcing Georgia to dilute its demands for independence. The Ossetians, said Georgia's newly elected nationalist president, Zviad Gamsakhurdia, "are agents of {Soviet President Mikhail} Gorbachev, who is applying pressure on us through this war."

At the height of the fighting Jan. 22, it required a ride in a Soviet armored personnel carrier to cross Tskhinvali, the capital of the self-proclaimed South Ossetian Democratic Republic. For two weeks, Georgian militia had besieged the town from behind concrete and sandbag barricades. All day and night Jan. 22 and 23, the two sides exchanged intermittent automatic weapons fire across the barricades, punctuated by the occasional sound of a rocket being launched.

The militia's armored vehicles patrolled the streets, eerily quiet in the snow. Up to 1,500 Georgian militia troops sealed the town, some carrying snipers' rifles with night-vision sights and using hollow-point bullets designed to spread and spiral through the body.

The Ossetians shot from the houses. They also appear to have been well-armed. Ten militiamen have died in the fighting and 22 have been wounded. The militia displayed a shattered but unexploded ground-to-ground rocket they claimed was fired by the Ossetians. One car carrying four militiamen was blown apart by a land mine, killing two of them.

The shooting has stopped since Saturday, after an agreement was reached and the bulk of the Georgian militia withdrew, leaving a residual force to patrol with Soviet Interior Ministry troops sent from Moscow. But armed gangs reportedly burned down 10 houses in the surrounding villages over the weekend, and the Soviet news agency Tass reported that barricades reappeared in Tskhinvali on Wednesday and that an Interior Ministry patrol trying to take them down was ambushed Thursday night.

The leader of the South Ossetian republic, Torez Kulumbekov, has been arrested, Tass also reported. The Georgian interior minister, Dilari Khabuliani, was chastized by the republic's parliament on Tuesday for agreeing to the militia's withdrawal. He defended it as the only way to end the shooting.

The conflict began after South Ossetia declared itself an independent republic in September. Blocking Ossetian separatism became a central plank in the electoral platform of Gamsakhurdia's Round Table Party. One month after his election in November, the Georgian parliament declared the new Ossetian republic void, also revoking the Ossetians' previous status as an autonomous region within Georgia.

On Jan. 7, Gorbachev proclaimed all these local rulings illegal, proposing that the Georgian militia withdraw, Soviet troops restore order and the autonomous region be reestablished. Until Saturday that order was ignored. A Georgian Interior Ministry spokesman insisted that Saturday's decision to withdraw had nothing to do with Gorbachev's decree.

The root of the conflict, a spokesman for the Ossetian National Front said, is that "Georgians want to separate from the {Soviet} Union and we do not." Across the Russian border, the Ossetians have an autonomous republic called North Ossetia. On both sides of the border, Ossetians speak Russian as their first language, though they have one of their own. The South Ossetian autonomous region was imposed by the Bolsheviks in 1922, immediately after Georgia was reannexed into the Soviet Union after three years of independence from the Russian Empire.

"We and the Georgians are twins," said Alice Dzhioeva, an English teacher in Tskhinvali. "And if twins quarrel they usually look to their mother, to someone older and wiser, for a solution."

The Ossetians repeatedly called for Soviet intervention and were deeply disappointed when it failed to materialize. "We hoped for the army to act after Gorbachev's decree. But they never did," Dzhioeva said.

Georgians, however, do not regard Moscow as their wise mother. Along with the Baltic republics, they have been the most adamant in reclaiming their national sovereignty. Interior Minister Khabuliani, a 37-year-old former European judo champion who ran the militia operation from the town's former KGB headquarters, claimed the Ossetians were getting their weapons from the Soviet army, which has paratroops stationed in the town. He was uncertain whether that was a matter of policy or corruption on the part of the army, but President Gamsakhurdia charged bluntly, "The Kremlin supports the bandits. It is giving them arms, rockets and bombs."

Both sides now believe Moscow is using the conflict to pressure Georgia into signing Gorbachev's new Treaty of the Union, on which all 15 republics have been told to hold referendums by March 17.

Ossetian National Front spokesman Cshar Djigkaev said, "Moscow wants to offer to eliminate our autonomy in exchange for Gamsakhurdia signing the treaty." He said he fears the leadership in Tbilisi, the Georgian capital, more than Moscow, remarking, "Russia is a big empire, Georgia is a small one. But smaller empires are always crueler."

The Georgians, for their part, see the Ossetians as a Communist fifth column, whose calls for intervention by the Soviet army may be used as a pretext for military occupation throughout Georgia.

As in Soviet Moldavia, where two tiny pro-Soviet regions declared themselves republics last fall, a South Ossetian republic hardly seems feasible. Cut off from North Ossetia by the natural boundary of the Caucasus Mountains, the region has a population of only 100,000.

Kulumbekov, chairman of South Ossetia's Committee of People's Deputies, said that declaring independence was a matter of "self-defense." He described Gamsakhurdia as a "fascist," and noted proudly that in 1920 Ossetia was a "Bolshevik republic" while Georgia was a "bourgeois state." That republic also was short-lived, quashed by Georgian troops.

Moscow's actual intentions remain inscrutable. Representatives of the Soviet army and Interior Ministry moved easily on both sides of the fence in Tsvinvali.

Approaching a Soviet army post in no man's land, our jeans-jacketed militia escort nervously fired at random and warned against talking to the Russian soldiers. "They're crazy," he said with a gesture.

Confronting each other, the soldiers and the militiaman immediately began to quarrel. "They want freedom, you want freedom, everybody wants freedom," a young Russian lieutenant said, with contempt.