Vladimir Putin was meeting European Union members to discuss energy co-operation but used a joint news conference on Friday to dismiss their criticism of Russia's cutting of transport and postal links with Georgia.
"The issue does not lie between Russia and Georgia, the issue is between Georgia and South Ossetia and Abkhazia," he said.
"It is moving in the direction of bloodshed because the Georgian leadership is seeking to restore its control through military means and they are quite open about that".
He said that the recent deterioration of relations between Moscow and Tbilisi, sparked by Georgia's arrest of four Russian army officers on spying charges, had been fabricated for political purposes.
Some Georgians have been deported from Russia, Georgian businesses have been shut down, and police have asked some schools to provide lists of pupils with Georgian-sounding names since the blockade was started.
Abkhazia and South Ossetia broke away from Georgia in the early 1990s when the Abkhaz and Ossetian ethnic groups revolted against Tbilisi's control. Russia has warned that it will defend the separatist territories if the Georgian government launches an assault to win them back.
Georgia's foreign minister accused Putin of deliberately misrepresenting the tensions between the two neighbours, and insulting the intelligence of his European colleagues.
"It is moving in the direction of bloodshed because the Georgian leadership is seeking to restore its control through military means and they are quite open about that"
"The government of Georgia and the people of Georgia have no intention to use force against its citizens as repeatedly stated," Gela Bezhuashvili said in Tbilisi.
"This is pure fiction and the Russian president knows this but chooses to presume that the international community is ignorant," he said.
Putin took a different tone on energy security, assuring the EU leaders that he wished to work with them.
"I would like co-operation to be not only mutually beneficial but that it be founded on common principles," he said.
The European Union, which gets a quarter of its gas and oil from Russia, had been eager to receive guarantees over energy supplies and delivered a united message that Moscow must give European firms a fair chance to exploit its huge energy resources or risk an investor exodus.
"We need to develop mutual trust that requires transparency, the rule of law, reciprocity, non-discrimination, market opening and market access," Jose Manuel Barroso, the European Commission president, said.
The Europeans are concerned about Russia's recent decision to develop the huge Shtokman gas field without foreign partners, and threats to halt a project off Russia's Pacific coast run by Anglo-Dutch energy giant Shell on environmental grounds.
On Shtokman, Putin said that the Russian gas monopoly Gazprom's decision to develop the vast gas field without foreign partners did not mean that the investment rules had changed in Russia.
Matti Vanhanen, the prime minister of Finland, whose country holds the EU's rotating presidency, called the talks with Putin "open and frank" and said that the bloc had tackled Putin on a number of sensitive issues including the murder of journalist Anna Politkovskaya.