"The European council is gravely concerned by the open conflict which has broken out in Georgia, by the resulting violence and by the disproportionate reaction of Russia," said the draft.

"(The review) may lead to decisions on the continuation of discussions on the future of relations between the EU and Russia in various areas."

The draft statement could yet change, and is seen as an attempt to bridge differences among members on how to treat Russia.

The summit agreed to postpone talks on a new EU-Russian partnership until Moscow withdraws its troops to pre-conflict positions.

Russia's EU envoy dismissed the decision to freeze the talks, saying that the move had damaged the European Union's credibility.

"It is more of a self punishment for the European Union because  this does not improve the EU's credibility as a negotiating partner," Vladimir Chizhov said.

Talk of sanctions at the summit, meanwhile, has exposed a developing rift between EU ranks.

Germany and Italy believe that Russia has to be "engaged not enraged", but Britain and the Baltic states want a tough stance against Russia, said Mark Seddon, Al Jazeera's diplomatic correspondent. 

Russia 'responsible'

Sergei Lavrov, the Russian foreign minister, said on Monday Moscow's military intervention in Georgia had set a new standard for defending its national interests.

"Russia has returned to the world stage as a responsible state which can defend its citizens," he declared, adding that the United States must "start adapting" to this reality.

Russia defeated Georgia in a brief war last month after Tbilisi tried to recapture by force its separatist, pro-Russian region of South Ossetia.

Moscow said it intervened to prevent "genocide" by Georgia in South Ossetia.

Officials say Monday's rally in Tbilisi was the biggest in Georgia's history [AFP]

Meanwhile, in the streets of Tbilisi on Monday, huge crowds of Georgians protested against Russia, many linking arms and waving the red and white Georgian flag.

Dan Nolan, reporting for Al Jazeera from Tbilisi, said that Mikheil Saakshvili, the Georgian president, told the protesters in a national address that allthough the EU has not imposed sanctions against Russia, he was "still of the firm belief" that sanctions will be imposed if Russia does not start honouring the terms of the ceasefire agreements.

Saakshvili also used the address to thanks the protesters who formed a "human chain" that snaked kilometeres through Tbilisi, said Nolan.

A spokesman for Gordon Brown, the British prime minister, said: "In light of Russia's actions we should suspend negotiations on a successor to the partnership and co-operation agreement."

A second round of negotiations on the accord, due to cover energy and trade ties, is due on September 15.

Diplomats said Jose Manuel Barroso, the EU commission president, also called at the summit for the September 15 talks to be cancelled.

That stance contrasted with a conciliatory tone in Paris, where Francois Fillon, the French prime minister, said Nicolas Sarkozy, the president, was ready to embark soon on a new mediation trip between Georgia and Russia.

Conciliatory step

In an apparently conciliatory step, Russia said it wanted the Organisation for Security and Co-operation in Europe (OSCE) and the EU to arrange an international police presence in buffer zones between Georgia and its breakaway regions.

The EU is looking to send civilian monitors to Georgia, with officials saying its presence could reach a few hundred staff.

Separately, Nato member Turkey began curbing Russian imports, in a move officials said followed delays to Turkish goods at the Russian border, since Ankara allowed two US ships to transit the Bosphorus Strait to provide aid to Georgia.

"We don't want to apply these measures, but we are acting reciprocally," Kursad Tuzmen, the Turkish foreign trade minister, said.

According to the draft EU leaders' summit declaration, the EU would look to make reconstruction aid available for Georgia and consider closer ties, including talks on a free trade deal and an easier visa regime for its citizens.

Moscow has withdrawn most of its forces in line with a ceasefire deal but has kept soldiers in "security zones", which include Georgian territory around South Ossetia and Abkhazia.

Western governments have demanded Moscow pull its troops back to pre-conflict positions, as it agreed to do under a French-brokered peace plan.

The Kremlin says the troops are peacekeepers needed to protect the separatist regions from new Georgian aggression.