When Russia invaded U.S. ally Georgia last August, the Kremlin presented its actions as a line in the sand marking the former Soviet republic as part of a resurgent Moscow's sphere of influence.
Western countries said they would not accept such territorial divisions. But NATO has now resumed formal ties halted last summer.
Speaking at a meeting of the relaunched NATO-Russia Council (NRC) in Corfu on June 27, NATO Secretary-General Jaap de Hoop Scheffer said cooperation over such issues as terrorism and nuclear nonproliferation were too important to allow the Russia-NATO rift to continue.
"We agreed, and that's the very positive conclusion of the meeting," de Hoop Scheffer said, "not to let disagreements bring the whole NRC train to a halt."
Fundamental differences over issues such as Georgia still exist, he added, but "Russia needs NATO and NATO needs Russia."
But despite the public show of rapprochement, friction is growing over the Caucasus region.
A week ahead of a summit meeting between U.S. President Barack Obama and his Russian counterpart, Dmitry Medvedev, the Kremlin is refusing to allow international monitors into the conflict area and has begun major military exercises north of the Georgian border. 'Pure Provocation'
More than 8,000 Russian troops are taking part in the two-week military exercises in the Caucasus region north of Georgia. They will also operate inside Georgia's pro-Moscow breakaway regions Abkhazia and South Ossetia, which Tbilisi called a "pure provocation."
Speaking in Corfu on June 27, Russian Foreign Minister Sergei Lavrov dismissed Western concerns over Georgia.
Russian Foreign Minister Sergei Lavrov (left) with EU foreign policy chief Javier Solana in Corfu
"Everyone should accept the new realities on the ground," Lavrov said. "Our decisions taken after the war begun by Georgia are irreversible and they should be accounted for in practical matters."
But Moscow's actions are prompting serious concern the Kremlin may be seeking a new conflict in the Caucasus.
Speaking to RFE/RL's Russian Service, economist Andrei Illarionov, a onetime economic adviser to then-President Vladimir Putin, says he believes Russia could invade Georgia over the ostensible threat of terrorism.
"All Russia's propaganda outlets have been talking about the possibility, saying Georgia is a terrorist threat," he says. "They've even begun saying that several recent terrorist acts in Russia may have a trail that leads to Georgia."
Russia destroyed the Georgian military last summer after Tbilisi attempted to retake separatist South Ossetia. Fresh Fears
However, Illarionov, now a fellow of Washington's Cato Institute, says Moscow provoked the hostilities. He says Russia began preparing for conflict with Georgia years earlier, helping build military bases and stationing its own troops in Georgia's two breakaway regions.
"When regular troops trespass on the territory of another country, including by crossing Russia's internationally recognized border with Georgia," Illarionov says, "it's an indisputable sign of aggression according to any international law."
This week's military exercises in the Caucasus end on July 6, the day Obama is due to travel to Russia.
Washington wants the summit to kick-start relations with Moscow. But Illarionov believes the Kremlin may launch an invasion of Georgia during Obama's visit.
His warning comes as the Organization for Cooperation and Security in Europe (OSCE) says it is also worried about a new conflict.
Russia has barred OSCE observers from the conflict zone around the South Ossetian border. Their mandate expired last week. UN Dilemma
The 200 unarmed European Union observers that remain in Georgia are unable to cross into the disputed territories. French Foreign Minister Bernard Kouchner lashed out at the situation during the Russia-NATO meeting in Corfu.
"I asked to make one millimeter of progress, with the EU observers going on the other side of the line," he said. "It has not been accepted."
Earlier this month, Russia vetoed the mandate of another group of monitors, more than 100 United Nations observers in Georgia's second breakaway region, Abkhazia.
Moscow has meanwhile failed to comply with key aspects of a French-brokered cease-fire ending last summer's conflict, partly by maintaining thousands of troops in both breakaway regions.
Last week, the Brussels-based International Crisis Group warned in a new report that the security situation around the conflict zones in South Ossetia and Abkhazia remains dire. "These factors create a potentially explosive situation in which even small incidents could spark a new conflict," the report says.
Military analyst Pavel Felgenhauer, who has also warned of a new conflict between Russia and Georgia, writes in the Jamestown Foundation's Eurasia Daily Monitor that Obama's Moscow visit next week may present the best hope to avoid a new war "if the U.S. president understands the threat and decides to put Georgia at the center of his negotiations."
But pulling it off, Felgenhauer writes, would be a "diplomatic miracle."