The European Union's vaunted tough stance against Russia has lasted a mere two months. It was only on September 1 that the EU agreed to freeze talks with Moscow on a new association agreement in protest at its military campaign in Georgia. This week 26 of the 27 EU members agreed to resume talks before the EU-Russia summit in Nice on Friday, even though Lithuania, the lone dissenter, pointed out correctly that Moscow had not complied fully with the French-negotiated deal to end the fighting.

Brussels insisted that it would not be a return to business as usual, and the decision did not legitimise the status quo in Georgia. The Europeans would keep pressing Russia to pull back its forces from South Ossetia and Abkhazia, the two separatist regions Moscow has recognised as independent. But given Russia's unctuous hopes that reason would now prevail, it is clear that the Russians believe they have won this spat.

Britain was one of several countries, including Poland and Sweden, uneasy at this apparent capitulation. David Miliband took an earlier firm stand over Georgia and needed much persuading that it was time to rebuild bridges, especially given Britain's frozen relations with Moscow. There are compelling arguments. The least principled is the economic case: that Europe depends on Russian energy exports and cannot cold-shoulder its main gas supplier indefinitely. But Europe must not allow Russia, itself heavily dependent on the European market, to imagine it holds its neighbours over an oil barrel.

There is a better economic case in the need for co-ordination to deal with the global recession. Russia is not a leading economic producer or consumer, but its huge cash reserves could play a significant role in the search for credit and capital. If Russian funds are to bail out Iceland or rescue ailing Western concerns, there need to be hard-headed discussions on the strategy, the terms and the political implications.

The main reason for re-engaging Russia, however, is realpolitik: this country of 140 million is still a significant global power. It holds a formidable nuclear arsenal and is able to project military force far beyond its borders. It is a permanent member of the UN Security Council. It has an equal role with the United States, the EU and the UN in the Quartet, the international consensus attempting to steer Israelis and Palestinians towards a settlement. And it plays a crucial role in the six-nation talks on North Korea and as part of the six countries trying to persuade Iran to abandon sensitive nuclear research.

Russia's recent policies have been far from co-operative. It has displayed a prickly nationalism, encouraged anti-American posturing around the world, been obstructive over Kosovo and vetoed UN resolutions on Iran and Zimbabwe. On the day that Barack Obama was elected, Russia chose not to congratulate him but to issue a threat to station missiles in Kaliningrad in response to US plans for a missile defence shield in Poland and the Czech Republic. Russia must still be held to account over Georgia. But the right response, as it was when the Soviet Union was actively undermining Western interests, is diplomacy. This must be multifaceted. Arms talks were not abandoned in 1989 because of Afghanistan, nor must other Western goals, including people-to-people contacts, be set aside because of Georgia.