Sept. 4 (Bloomberg) -- U.S. Vice President Dick Cheney assured Georgian President Mikheil Saakashvili of U.S. support to recover from its war with Russia on the heels of President George W. Bush's promised $1 billion aid package.

``America will help Georgia rebuild and regain its position as one of the world's fastest growing economies,'' Cheney told reporters in the capital Tbilisi today. He said the U.S. funds will ``support reconstruction, humanitarian needs, the resettlement of displaced persons and other vital priorities.''

Under Saakashvili, Georgia has become a staunch U.S. ally in Russia's backyard. It's the third-largest member of the allied coalition in Iraq and a vital link in a U.S.-backed ``southern energy corridor'' that connects the Caspian Sea region with world markets, bypassing Russia.

Cheney, the highest-level U.S. official to visit Georgia since its armed conflict with Russia over South Ossetia, called Russia's incursion last month ``an invasion of your sovereign territory and an illegitimate, unilateral attempt to change your country's borders by force.''

The vice president said he assured Saakashvili of U.S. support for the country's territorial integrity after Russia recognized the independence of South Ossetia and another breakaway region, Abkhazia.

Georgia's economy incurred more than $1 billion in damage as a result of Russia's military incursion, Prime Minister Lado Gurgenidze said yesterday. On top of Bush's $1 billion pledge, the International Monetary Fund agreed to a U.S.-backed proposal to lend Georgia $750 million to replenish its foreign-currency reserves.

U.S. Aid

U.S. Secretary of State Condoleezza Rice said yesterday that it's too early to discuss ``assistance on the military side'' for Georgia.

Saakashvili thanked the U.S. for its support. ``Together with our partners in Europe, America and elsewhere, we will rebuild Georgia,'' he said. ``Looking forward, that is my number one priority.''

Georgia is the second of three stops Cheney is making in the area. After talks with Saakashvili, he flew to Kiev, where Ukrainian President Viktor Yushchenko yesterday threatened to dissolve the parliament and call elections after his party quit the ruling coalition when Prime Minister Yulia Timoshenko teamed up with a pro-Russian opposition party.

The U.S. backs bids by Georgia and Ukraine to join the North Atlantic Treaty Organization. The alliance in April said both former Soviet republics will eventually become members, while declining to put their bids on a fast track.

Vladimir Chizhov, Russia's ambassador to the EU, said today that the Russia-Georgia conflict has pushed Ukraine ``into a deep political crisis,'' not closer to the West. ``This mostly seems to have been over differences of opinion about how to view the situation in the Caucasus,'' he said by phone.

Private Lunch

After a private lunch at a local restaurant, Cheney and Saakashvili watched humanitarian supplies including blankets, food and toiletries being unloaded at Tbilisi's airport from a C-130 cargo carrier from Italy. The U.S. has delivered about $37 million in supplies since the five-day war broke out, said Stephen Guice, a spokesman for the U.S. embassy in Tbilisi.

Cheney met yesterday with Azeri President Ilham Aliyev in Baku and said the U.S. and European countries, including Turkey, ``must work with Azerbaijan and other countries in the Caucasus and Central Asia on additional routes for energy exports that ensure the free flow of resources.'' Energy users and producers are best served when ``energy export routes are diverse and reliable,'' he said.

Pipelines

Azerbaijan is the starting point for the flow of Caspian oil and gas westward to Europe, bypassing Russia. BP Plc's Baku- Tbilisi-Ceyhan pipeline can carry as much as 1 million barrels of Azeri crude a day through Georgia to Turkey's Mediterranean coast. Another BP-led pipeline, the Baku-Supsa, moves crude from Azerbaijan to Georgia's Black Sea coast.

The planned Nabucco pipeline, backed by the European Union, will bring gas from the Caspian region via Turkey to Austria and western Europe by 2013.

As part of its military cooperation with the U.S., Georgia contributed 2,000 soldiers to the allied coalition in Iraq. While the troops were brought home during the conflict with Russia, they will return to Iraq, Georgian Defense Ministry spokeswoman Nana Intskirveli said by phone today. No timetable has been set for their return, she said.

The U.S. is weighing possible sanctions against Russia for its military operations in Georgia and recognition of South Ossetian and Abkhaz independence on Aug. 26.

`Peaceful Resolution'

``We call for the peaceful resolution of the dispute over the Georgian territories of Abkhazia and South Ossetia based on good-faith discussions among the parties and objective international mediation,'' Cheney said. ``Russia's actions have cast grave doubt on Russia's intentions and on its reliability as an international partner, not just in Georgia, but across this region and, indeed, throughout the international system.''

Nicaragua on Sept. 2 became the second country to recognize the regions, President Daniel Ortega said in a speech. Russia's allies in Europe and Asia haven't followed suit. Russia and six other former Soviet republics -- Armenia, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan -- will reach a ``final position'' on Georgia tomorrow at a summit of the Collective Security Treaty Organization, a regional security organization, Russian President Dmitry Medvedev said this week.

Investor Confidence

One cost to Russia already is an erosion of investor confidence, according to U.S. officials. That theme was echoed by Assistant Secretary of State Daniel Fried, who said in Brussels that Russia is scaring away foreign investors and sinking deeper into isolation.

``The business community is voting,'' Fried said in a Bloomberg Television interview yesterday. ``The billions of dollars that have fled the Russian stock market are an indication that Russia's self-triumphalist rhetoric is not really appropriate.''

About $30 billion in capital has left Russia since the start of the war in Georgia, according to BNP Paribas SA, France's largest bank.

To contact the reporter on this story: Roger Runningen in Tbilisi at rrunningen@bloomberg.net; Helena Bedwell in Tbilisi at hbedwell@bloomberg.net

Last Updated: September 4, 2008 09:33 EDT