TSKHINVALI: Russian President Dmitry Medvedev warned Saturday that Georgia's leadership would face "retribution" for last year's war in South Ossetia, as the pro-Russian rebel region marked the first anniversary of the conflict.

"I am certain that, in time, just and severe punishment, severe retribution, will come to those people who issued the criminal orders," to attack the breakaway Georgian region, he said in remarks broadcast on Russian state television.

Medvedev also warned a new conflict in the volatile Caucasus region could not be ruled out due to Georgia's recent actions and implicitly accused the United States of ratcheting up tensions with its aid to Tbilisi.

"It is well known who armed and who, unfortunately, is continuing to arm the Tbilisi regime," he said, a clear reference to the United States, which provided military training and equipment to Georgia before last year's war.

Medvedev issued his warning as he visited a military base in southern Russia near the border with Georgia where he decorated troops.

The military base in Vladikavkaz is home to the 58th army, which led Russia's counter-attack that pushed Georgian forces out of the rebel region and back deep into Georgian territory following their assault on South Ossetia.

An EU-brokered ceasefire ended the conflict five days later, after several hundred people had been killed and thousands wounded.

Moscow has sinced recognised South Ossetia and another Georgian rebel region, Abkhazia, as independent -- to almost universal condemnation in the international community.

Meanwhile, ceremonies were held in the rebel territory itself.

In the South Ossetian capital, Tskhinvali, hundreds of people held a candle-light vigil shortly before midnight, the time when Georgian forces launched the assault that triggered the conflict.

The local residents gathered around a fountain on the main square in Tskhinvali, the rebel province's main city, where they placed candles on empty artillery shells.

Images of Georgian President Mikheil Saakashvili, interspersed with pictures of destroyed homes and elderly women in tears, were projected on a giant screen in the square while musicians played melancholy music.

Eduard Kokoity, leader of South Ossetia, addressed the crowd and said Georgia bore all the blame for the conflict.

"The goal of the operation was the destruction and exile of the South Ossetian people," Kokoity said.

"South Ossetian fighters courageously thwarted Tbilisi's plans for blitzkrieg. Russian troops came to the rescue of South Ossetia and pushed the bloodthirsty enemy back," he said.

In Georgia proper, commemorative ceremonies were held Friday, reflecting continuing disputes over everything from who started the war to when it actually began.

Among the events in Tskhinvali on Saturday, the wreckage of a home destroyed in the conflict was used for the inauguration of a "genocide museum" documenting some of the horror in South Ossetia last year.