Georgia said yesterday its forces were in control of the capital of the breakaway region of South Ossetia, but rebels said Russian armoured vehicles had entered the northern edges of the city.
"Tskhinvali and the heights around Tskhinvali and the majority of the villages in South Ossetia are under the control of Georgian forces," Georgia's pro-Western President Mikheil Saakashvili said in a televised address.
However, the separatists' press service said on its website cominf.org yesterday: "Russian armoured vehicles have entered the northern suburbs of Tskhinvali". It added that Georgian troops had started to retreat.
Moscow said its troops were responding to a Georgian assault to re-take the breakaway region, and Mr Saakashvili said the two countries were at war. The Georgian leader said on television: "What Russia is doing in Georgia is open, unhidden aggression and a challenge to the whole world.
"If the whole world does not stop Russia today, then Russian tanks will be able to reach any other European capital."
US Secretary of State Condoleezza Rice urged Russia to withdraw combat troops from Georgia and stop air strikes.
"We call on Russia to cease attacks on Georgia by aircraft and missiles, respect Georgia's territorial integrity, and withdraw its ground combat forces from Georgian soil," she said in a statement.
The President of South Ossetia, Eduard Kokoity, was quoted as saying about 1,400 people had been killed as a result of "Georgian aggression".
"About 1,400 died. We will check these figures, but the order of the numbers is around this. We have this on the basis of reports from relatives," he told Russia's Interfax news agency.
The head of Georgia's Security Council, Kakha Lomaia, said Georgia would withdraw 1,000 soldiers from Iraq to help fight off Russian forces in South Ossetia.
The Russian Transport Ministry said Russia would cut air links with the ex-Soviet state from midnight.
The upsurge in violence in Georgia caused Russian shares to plummet yesterday and helped send emerging stock markets to their lowest level in almost a year.
President George W. Bush, in Beijing for the opening of the Olympic Games, pledged US support for Georgia's territorial integrity, the White House said.
"I want to reiterate on his behalf that the United States supports Georgia's territorial integrity and we call for an immediate ceasefire," White House spokeswoman Dana Perino said in a statement.
In Washington, State Department spokesman Gonzalo Gallegos said the US was sending an envoy to the region. Envoys from the EU and the Organisation for Security and Cooperation in Europe were also due to head to Georgia.
EU foreign policy chief Javier Solana said he had spoken to the Russian and Georgian foreign ministers, Sergei Lavrov and Eka Tkeshelashvili, to call for an end to the violence.
"I am deeply concerned over the dramatic situation in Georgia and I deplore the loss of human lives and the suffering inflicted on the civilian population," he said in a statement.
The Kremlin said Russian President Dmitry Medvedev spoke to German Chancellor Angela Merkel and told her "the only possible way out is the withdrawal of Georgian forces to starting positions".
A senior Georgian security official said Russian planes had bombed a military base outside the Georgian capital Tbilisi.
The Interior Ministry said later three Georgian soldiers were killed.
Political analysts saw Georgia's bid to re-take its rebel region of South Ossetia by force as a gamble by its leader that he could still count on Western support in a clash with Russia.
Mr Saakashvili, who wants to take his small Caucasus country into Nato, has made it a priority to win back control of South Ossetia and Abkhazia, another rebel region on the Black Sea.
The issue has bedevilled Georgia's relations with Russia, angered by Tbilisi's moves towards the Western fold and its pursuit of Nato membership.
Latest...
Georgian President Mikheil Saakashvili was expected to declare martial law last night.
"The President is going to declare a state of martial law within a few hours," Kakha Lomaia, the secretary of Georgia's Security Council, said late last night. "Russia has bombed the (Black Sea) port of Poti and the military base at Senaki. We think Russia has started to bomb civil and economic infrastructure."