Russian President Dmitry Medvedev signed a decree recognizing the Georgian rebel regions of South Ossetia and Abkhazia as independent states, a move that caused the West to react negatively.
Medvedev said in a televised statement on Tuesday that he has signed a decree that recognizes the independence of the two regions.
However, Western leaders had strongly urged Russia not to recognize the two regions instead urging Moscow to back Georgia's territorial integrity. Britain has rejected this move while Sweden called this decision one that will bear consequences for a long time.
"That the Russian government leadership now has chosen this route means they have chosen a policy of confrontation, not only with the rest of Europe, but also with the international community in general," said Carl Bildt, Sweden's foreign minister to Reuters.
Meanwhile, the news brought joy to residents in the Abkhaz capital Sukhami where citizens uncorked champagnes and wept on the news from Moscow
Russian market fell on the news as investors worry about future tensions, which experts believe is an indication of what is to come. "The recognition of these two entities is clearly a step in the wrong direction from the stock markets' point of view," said David Aserkoff, an equity strategist at Renaissance Capital to Reuters.
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