U.S. weighs measures against Russia: Rice

By Susan Cornwell

NEW YORK (Reuters) - The United States is mulling what measures to take should Russia exploit the oil or minerals of two Georgian breakaway provinces it invaded last month, U.S. Secretary of State Condoleezza Rice said on Friday.

Interviewed by Reuters, Rice used unusually stern language to describe actions by Russia, which she said had dug itself into a "hole" internationally with its incursion into formerly Soviet Georgia.

"Sometimes when someone has dug a hole, it's just best to leave them in it," Rice said of the Russians.

Much of the rest of the world, she said, was turned off by Moscow's military incursion into Georgia last month and subsequent recognition of two separatist areas of Georgia, South Ossetia and Abkhazia, as independent states.

Under a French-brokered ceasefire deal, Russia has until October 10 to withdraw troops from "security zones" around South Ossetia and Abkhazia. Russia has said it will keep a planned 7,600 troops in the two separatist regions indefinitely.

U.S. officials warn that Moscow will face a strong reaction if it does not comply with the ceasefire deal. Rice said Washington is also watching to see whether Moscow moves to extract natural resources from the breakaway regions.

"We're looking at questions of what the posture of the United States would be, should Russian companies ... choose to try to do business in, or certainly, involve themselves in extractive activities, in what is a zone of conflict, and is indeed a part of ... the internationally recognized boundaries of Georgia," she said.

"Extractive can mean more than oil, it can also mean minerals," she said. She did not say what the United States could do about any such mining. "We haven't made any determinations."

The United States already has frozen a civilian cooperation agreement with Russia because of its behavior in Georgia and canceled a military exercise.

"PLENTY OF INSURANCE"

Rice appeared unfazed by Russian President Dmitry Medvedev's announcement on Friday that Moscow would beef up its nuclear deterrent at a time of heightened tensions with Washington.

Medvedev said Russia would build a space defense system and a new fleet of nuclear submarines by 2020.

"The balance of power in terms of nuclear deterrence is not going to be affected by those measures," Rice declared.

She said the United States has an "extremely capable, robust, broad, and indeed varied nuclear deterrent," adding that Washington would modernize it as necessary.

"That is plenty of insurance against any modernization that Russia might undertake."