U.S. President George W. Bush decided Monday to pull a lucrative US-Russia civilian nuclear pact from consideration by the US Congress, Secretary of State Condoleezza Rice said, the first tangible U.S. penalty imposed on Russia after its war with Georgia.

"The president intends to notify Congress that he has today rescinded his prior determination regarding the US-Russia agreement for peaceful nuclear cooperation," according to a statement read by Rice's spokesman Sean McCormack.

Decision with regret

"We make this decision with regret," the statement said, adding that the agreement will be reevaluated at an appropriate time.

McCormack said that the Russian government was notified ahead of the decision.

The announcement was not a surprise since the White House said August 28 that it was considering dropping the agreement, and a State Department official said last week the deal would like be scrapped.

McCormack declined to directly relate Bush's decision to the war last month between Moscow and Tbilisi over the Georgian breakaway region of South Ossetia, which is pro-Russian.

He indicated the action was related to a series of Russian moves that had made Bush uncomfortable about assuring Congress the nuclear deal should be undertaken at the current time. But he said the nonproliferation goals contained in the accord remained valid and could be taken up again at a later time.

The agreement aimed to allow US and Russian companies to form joint ventures in the nuclear sector and gives the go-ahead for exchanges of nuclear technology between the two countries, according to officials on both sides.

Under the deal, Russia would also be able to reprocess spent nuclear fuel originating in the United States, which accounts for most of the world market, in a move that has raised fears of Russia being turned into a nuclear dump.

Bush and his Russian counterpart at the time Vladimir Putin inked the agreement at a summit in Kennebunkport in the United States last year and discussed it again in the Russian resort of Sochi last month.

Russian troops poured into Georgia last month to repel an attack by the Georgian army aimed at retaking South Ossetia. They have remained deep inside Georgian territory in what Moscow calls "security zones."

Washington has been considering a range of penalties to impose on Russia, including sanctions, but U.S. business interests have warned the White House not to go too far with punishment for fear of damaging long-term ties.

Withdrawing troops

Russia agreed Monday to withdraw all troops from Georgia within a month but reaffirmed its support for the independence of two rebel regions where Russian forces will remain.

The new timetable was announced by French President Nicolas Sarkozy at the head of an EU delegation in Moscow to put press the Kremlin to abide by a ceasefire accord he brokered last month to end the five day Russia-Georgia war.

Speaking alongside Russian President Dmitry Medvedev, Sarkozy said the new deal stipulated "in one month, the complete pull-out of Russian forces from Georgian territory, outside South Ossetia and Abkhazia."

Medvedev said he had agreed on the deployment of at least 200 European Union observers in Georgia by October 1 to monitor the ceasefire as Russian troops withdraw.

He added that there would be a "complete withdrawal of Russian peacekeeping forces" from zones adjacent to South Ossetia and Abkhazia 10 days after the deployment of the EU observers.

Medvedev said his decision to recognize the two regions as independent states was irrevocable and that international talks would be held on the two regions on October 15 in Geneva.

In the meantime, the Russian Foreign Ministry said that Moscow will exchange documents on Tuesday with Abkhazia and South Ossetia to establish diplomatic relations at the level of embassies with the two rebel Georgian regions