Russian President Vladimir Putin and Georgian President Eduard Schevardnadze have agreed on a truce and will now co-operate in hunting down Chechen rebels inside Georgia.

Russia says the rebels launch raids against its soldiers from across the border.

Last month, Putin warned Shevardnadze that Georgia had to wipe out rebel bases on its territory or else Russia would. But after meeting with Shevardnadze at a conference of former Soviet nations, he was less strident.

"My (previous) statements will not be carried out, if (Sunday's) agreement with the Georgian president is implemented," Putin said.

"Russia does not hold anything against Georgia," said Putin. "The fight against terrorism is a common threat."

Until now, Georgia has tried to stay away from the Russian-Chechen conflict, which is being carried out just north of its borders. And for good reason, says Theo Japaridze, Georgia's national security adviser. Chechen rebels could strike back, after all. "The Panski Gorge," he says, "is just 60 kilometres from (the Georgian capital) Tblisi."

Russia claims there are hundreds of Chechen rebels hiding in the Panski Gorge and surrounding mountains. Some, Moscow says, are linked to Osama bin Laden's al-Qaeda network.

The Georgian military has launched an offensive to flush out the fighters, but questions remain over the effectiveness of the operation and whether it will be enough to satisfy Moscow.

American officers are helping with the training of Georgia's troops. Some say having America as a friend helps Georgia to neutralize Russia. Analyst Alexander Rondeli says Russia is trying to regain its influence in the Caucasus.

"Russians believe the Caucasus are extremely important for them in the future, for their stability, and also for the protection of Russia," he said.

Georgia may have bought time for itself by promising tougher action against Chechen rebels. But if it doesn't, or can't, deliver to Russia's satisfaction, some believe Putin could copy U.S. President George W. Bush and use the argument of self defence to launch an attack.