World leaders have stepped up calls for an end to the conflict [AFP]

The decree by Mikheil Saakashvili, the Georgian president, was announced on Saturday and effectively imposes martial law across Georgia for 15 days.

"I have signed a decree on a state of war. Georgia is under a state of total military aggression by the Russian navy, air force, large-scale ground operations," Saakashvili said.

The move comes after Russian tanks and troops surged into South Ossetia late on Thursday to repel a Georgian offensive aimed at reclaiming the region amid fighting said to have left hundreds dead.

Mounting casulaties

Georgian and South Ossetian forces both claimed that Tskhinvali, the South Ossetian capital, was under their control, but on Saturday Russia said that it had "liberated" the city for Georgia.

"Tactical battalions have completely liberated Tskhinvali from Georgian military forces," General Vladimir Boldyrev, head of Russia's ground forces, was quoted as saying by Russian news agencies.

Georgia said a Russian air raid had "devastated" the Black Sea port of Poti in attacks, the first attack by Russia outside of South Ossetia.

The Moscow-backed administration in South Ossetia said 1,600 people had been killed since Georgia launched its offensive on Tskhinvali, but Saakashvili dismissed the claims as a "truly Soviet-style disinformation campaign".

World leaders, fearing a return to the Caucusus wars of the 1990s, stepped up calls for an end to the conflict.

Georgia also now faces fighting on two fronts after the foreign minister of Georgia's other breakaway province of Abkhazia said its separatist forces had launched air and artillery strikes to drive Georgian troops from the region.

Sergei Shamba said Abkhazian forces intended to push Georgian troops out of the Kodori Gorge. The northern part of the gorge is the only area of Abkhazia that has remained under Georgian government control.

A spokesman for the pro-Georgian Abkhaz government-in-exile said the bombings had been carried out by Russian warplanes.

"Earlier today ... Russian jet fighters bombed two villages in the upper part of the gorge," Raul Kiria, the government in exile's spokesman, said.

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