Russia and Germany on Thursday moved to restore close bilateral relations after tensions in the Georgia conflict by endorsing a significant gas exploration deal between two of the countries’ key energy players.

Angela Merkel, German chancellor, speaking after talks in St Petersburg with Russian president Dmitry Medvedev, said there had not been a “chill” in relations with Moscow, although she did repeat that Russia’s August incursion into two Georgian enclaves had been “unacceptable”.