The U.S. has pulled out of a civilian nuclear deal with Russia in response to the conflict in Georgia. The agreement reached in May would have opened up markets between the countries by removing Cold War era restrictions. However, it was thought Capitol H

Secretary of State Condoleezza Rice released a statement saying the White House had scrapped a civil nuclear pact with Moscow – the so-called 123 Agreement.

“We make this decision with regret. Unfortunately, given the current environment, the time is not right for this agreement. We will re-evaluate the situation at a later date as we follow developments closely,” Rice said.

Russia and the U.S. had been discussing a civil nuclear pact for over a decade.

But it was only in May that Bush signed the deal. He was also the one who introduced it to Congress. And before the events in Georgia, the biggest remaining hurdle was Iran.

The agreement would have established a 30-year framework for cooperation between Russia and the U.S. in the peaceful use of nuclear energy.

It was also designed to allow the trade of nuclear material as well as the exchange of research and technology between Moscow and Washington.

The deal would have been mutually beneficial. Russia would import, store and even reprocess spent nuclear fuel – a business worth billions of dollars – and the U.S. would have got access to advanced nuclear technology.

The Russian Foreign Ministry has called the decision “regretful” and pointed out that it does not help bilateral relations between the two countries.

“We take the U.S. administration’s move as a clear violation of its obligations that harms our partnership and closes the way for a mutually beneficial cooperation,” the ministry stated.

“There are times in foreign policy when you punish yourself at the same time as you punish others because you are trying to show you are serious and prepared for some real sacrifice,” said Michael O'Hanlon, Senior Fellow in Washington’s Brookings Institution.

But some Americans still believe the punishment doesn't fit the crime. They say Russia is not the only one to blame for the situation in South Ossetia.

“There's fault on both sides. President Saakashvili probably should not have used such aggressive tactics,” a passer-by in Washington said.