By Denis Dyomkin

MOSCOW (Reuters) - Russian President Dmitry Medvedev on Friday accused NATO of provoking the conflict with Georgia but he said strains with the West did not mean Russia planned to isolate itself behind a new Iron Curtain.

Medvedev was speaking a day after U.S. Secretary of State Condoleezza Rice launched a blistering attack on Russia, saying it had taken a "dark turn" and urging the West to stand up to what she called its bullying tactics.

"All the time there are discussions that 'Finally they (the Russians) will show their true colors .. that the hawks have won'," Medvedev told a gathering of civil society groups in the Kremlin.

"We are in effect being pushed down a path that is founded not on fully-fledged, civilized partnership with other countries, but on autonomous development, behind thick walls, behind an Iron Curtain," Medvedev said.

"That is not our path. For us there is no sense going back to the past. We have made our choice."

He said the NATO alliance's role in the Georgia conflict showed it was unable to provide security in Europe, underlining the need for a new security mechanism.

"That is understood even by those who in private conversations with me say ... 'NATO will take care of everything'. What did NATO secure, what did NATO ensure? NATO only provoked the conflict, and not more than that."

Responding to Medvedev's remarks, NATO spokesman James Appathurai told Reuters: "There is nothing provocative in partnership and there is also nothing provocative in promoting democratic reform, economic reform and supporting a country's aspirations to move closer to the Euro-Atlantic community."

SOOTHING MARKETS

Russia launched a massive counter-attack by land, sea and air last month after Georgian forces tried to retake the Moscow-backed breakaway region of South Ossetia. Western states condemned Russia's actions as disproporionate.

Georgian President Mikheil Saakashvili has subsequently said Russian troops and armored moved into Georgia before his forces attacked, an allegation Moscow has denied.

Russian officials say NATO's agreement to take in Georgia as a member -- albeit at an unspecified date in the future -- emboldened Georgia to attack South Ossetia. The Kremlin says Western states also played a role by arming Georgia's military.

Medvedev's pledge that Russia will not retreat into authoritarianism appeared aimed, in part, at rebuilding battered confidence on financial markets.

Russian stocks this week suffered their worst losses in a decade, though they recovered strongly on Friday after the state made available a $130 billion emergency support package.

The fall was caused by a combination of global financial turmoil, falling oil prices and market worries that the rift with the West over Georgia had driven up political risk.

Some analysts have said the diplomatic and market turbulence could play into the hand of Kremlin hawks, who have resisted Medvedev's agenda of liberalizing the economy.

Speaking at an economic forum in the Black Sea resort of Sochi on Friday, Prime Minister Vladimir Putin echoed Medvedev's message, saying Russia needed to modernize its free-market economy, not roll it back.

"Our policy, our basic approaches remain unchanged," Putin told the forum. "We are betting on private initiative, freedom of enterprise and rational integration into the world economy."

(Additional reporting by Luke Baker in London; Writing by Christian Lowe; Editing by Richard Balmforth)

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