"Unfortunately, after the developments [Georgia's August 8 attack on Tskhinvali] South Ossetians and Abkhazians are unlikely to be able to live within Georgia," Dmitry Medvedev told German Chancellor Angela Merkel at a meeting in Russia's Black Sea resort of Sochi.
He said it would take a "Herculean effort" to enable the territories to remain part of Georgia, adding that he would accept any decision on the two breakaway republics' status that reflected their desires.
Medvedev warned the West against putting the blame for the developments on Russia alone, urging everything be done to minimize the consequences of the tragic events.
The German chancellor said: "One side alone is rarely to blame in a complicated conflict like this."
She said it was time "to go forward," not to look for exact reasons or analyze the past.
However, Merkel said Germany considered Georgia's territorial integrity a key point in the settlement of the conflict.
"We should respect the judgment of free countries, which, seeking accession to NATO, make their own free decisions," Merkel said.
Russian Foreign Minister Sergei Lavrov said earlier Russia refused to consider Georgian President Mikheil Saakashvili an appropriate political partner, since he had issued "criminal orders" in launching Georgia's attack on South Ossetia.
Russia responded by sending thousands of troops and hundreds of tanks to force Georgian troops out of the rebel region in a "peace enforcement" operation.
Merkel said that: "Taking into account Russia's description of the situation, I nevertheless say that the Russian reaction was disproportionate."
Russia has no objections to the deployment of an international peacekeeping force in the Caucasus, the Russian president said adding, however, that Georgia's rebel republics of Abkhazia and South Ossetia trusted only Russian troops.
"The party that has suffered from violence and aggression should have the final say in this situation," he said.