Russia drew Western criticism when it recognized Georgia's breakaway South Ossetia and Abkhazia as independent states in late August. The move came two weeks after Russia had ended its military operation to "force Georgia to peace." The operation came in response to an attack by Georgian forces on South Ossetia on August 8.
"We discussed the situation in the Caucasus - differences on the issue have not been settled completely so far," Merkel told a news conference following talks with President Dmitry Medvedev on the sidelines of the Russian-German business forum in St. Petersburg.
"Georgia's territorial integrity is not up for discussion," she said.
Merkel said international talks in Geneva on October 15 would help resolve the issue. The agenda for the talks includes the return of refugees to the region and security in the Caucasus.
European Union observers began their monitoring mission in Georgia on October 1. Two hundred EU observers from 22 member states are set to monitor the pull-back of Russian forces from buffer zones near South Ossetia and Abkhazia. Russia has agreed to pull out all its remaining peacekeepers from the zones by October 10.
Merkel also said Georgia and another ex-Soviet republic, Ukraine, had the right to join NATO. However, she said their bids for action plans that would put them on the path to membership of the military alliance were unlikely to be approved at a conference of NATO defense ministers in December.
"The time has not come for the MAPs [Membership Action Plans]," said the German chancellor, who was also opposed to granting action plans to the two former Soviet republics at a NATO summit in April.
Speaking at the news conference with Merkel, Medvedev was upbeat about the future of Russia-EU relations despite tensions triggered by the Georgia conflict.
Earlier on Thursday in St. Petersburg, Germany's E.ON AG signed a deal with Russian energy giant Gazprom to take a 25% minus one share in West Siberia's Yuzhno-Russkoye gas field. Gazprom will receive 49% in ZAO Gerosgaz in return.
