MUKHROVANI, Georgia (Reuters) - Georgia said it put down a mutiny at a military base on Tuesday and accused Moscow of financing a coup on the eve of NATO war games in the former Soviet republic.

Russia, which fought a war with Georgia last year, denied any involvement and said President Mikheil Saakashvili was trying to shift the blame for his domestic problems.

Georgia's opposition said the incident was "a show" to deflect attention from protests against the president.

Saakashvili called the rebellion at the Mukhrovani tank base a "serious threat." Police kept reporters at a distance and it was not clear how many of the 500 soldiers there were involved.

About three hours after news broke of a military uprising, around 30 tanks and armored personnel carriers entered the base, followed later by Saakashvili and the ministers of defense and interior, a Reuters reporter said.

Officials said officers had surrendered and their commander had been arrested.

Earlier, Russia's Interfax news agency said Mukhrovani base commander Mamuka Gorgishvili had made a statement criticizing Saakashvili's government but pledging not to use force.

"One cannot look calmly at the process of the country falling apart, at the ongoing confrontation. But our tank unit will not resort to any aggressive actions," the agency quoted Gorgishvili as saying.

Defense Minister David Sikharulidze told Reuters the plotters wanted to undermine month-long NATO exercises beginning this week in Georgia which Russia has criticized.

Sikharulidze told Rustavi 2 television the rebellion was also "an attempt at a military coup." Saakashvili accused the plotters of links to Moscow and demanded neighboring Russia "refrain from provocations."

Russia said the Georgian accusations were insane.

"Today what is happening is what we have always feared -- the Georgian leadership are trying to shift their domestic problems on to Russia," Russian Deputy Foreign Minister Grigory Karasin told reporters.

"Instead of dialogue inside the country, the Georgian leadership is trying to accuse Russia of totally insane things."

Military experts in Tbilisi suggested the rebellion could be linked with plans to use troops to end weeks of opposition road blocks that have paralyzed Tbilisi, and that some officers had refused to participate.

"This chimes with what we are hearing from military sources," a senior Western diplomat said.

RUSSIA SAYS ACCUSATIONS "INSANE"

The Georgian Interior Ministry said several former and serving security officials were being investigated, and at least one was detained.

Georgia lost a brief war against neighboring Russia last August. Russia crushed in a matter of days a Georgian assault on the rebel pro-Moscow region of South Ossetia, drawing criticism from the West for a "disproportionate" response.

The conflict slammed the brakes on Georgia's bid for membership of NATO, which the Kremlin fiercely opposes as an encroachment on its traditional sphere of influence.

Ties between Moscow and NATO have come under renewed strain since the announcement of the military exercises and the expulsion last week of two Russian diplomats from the Western military alliance.

Russian Foreign Minister Sergei Lavrov has dropped plans to attend a meeting of the NATO-Russia Council this month in protest at NATO's expulsion of the Russian diplomats.

NATO said it regretted Russia's decision and hoped a new date would soon be agreed for the talks.

The mutiny had little impact on financial markets. Georgian assets are little traded and investors have been skeptical in the past of official statements until facts were clear.

Fitch ratings agency said it would likely cut Georgia's B+ debt rating if political instability continued.

EXERCISES 'IN A MADHOUSE'

Russia's NATO envoy Dmitry Rogozin said NATO would be better off holding its exercises in a madhouse since "Georgia's military cannot properly receive their colleagues because they are rioting against their own president."

The NATO exercises from May 6 to June 3 are a gesture of solidarity for Georgia, which sits at the heart of a region crucial for energy transit from the Caspian Sea to Europe.

Around 1,000 soldiers from more than a dozen NATO member states and partners will practice "crisis response" at an army base east of Tbilisi, around 70 km (44 miles) from the nearest Russian troop positions in breakaway South Ossetia.

Opposition protesters blocking streets in Tbilisi are demanding Saakadhvili resign over his record on democracy and the war, and said on Monday they would broaden street blockades to the main east-west highway and entrances to the capital.

On Tuesday they postponed new road blocks for several days. "It's very clear the government just wanted to transfer attention to this from the protests," said opposition Conservatives leader Kakha Kukava.

(Additional reporting by Margarita Antidze and Matt Robinson in Tbilisi, Oleg Shchedrov and Dmitry Solovyov in Moscow, writing by Guy Faulconbridge, Matt Robinson and Michael Stott, editing by Robert Woodward)

© 2009 Reuters

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