(Adds Georgia to block Russian WTO entry, blasts, quotes)

By James Kilner

MOSCOW, May 16 (Reuters) - Russia's domestic spy service accused Georgia on Friday of supporting armed rebels in southern Russia, an accusation that could further damage the strained relations between the two countries.

A source in the Federal Security Service (FSB) told Interfax news agency a Chechen man working for Georgian intelligence had been giving cash to fighters across the turbulent North Caucasus.

"This confirms that Georgian special forces have participated in subversive terrorist activities in the North Caucasus," Interfax quoted the FSB source as saying.

Russia and Georgia are locked in a row over Georgia's two breakaway regions of Abkhazia and South Ossetia, which Russia supports. Georgia says war was only narrowly averted earlier this month.

Georgia said on Friday it would block negotiations on Russian entry to the World Trade Organisation until Moscow reversed a decision last month to step up ties with the two breakaway regions.

The FSB comments surfaced just as a Georgian minister was to meet officials from Russia's Foreign Ministry in Moscow to discuss how to repair relations.

In northern Georgia, a Georgian policeman was injured in an explosion in the village of Ergneti, while a second explosion in the nearby village of Eredvi just missed an automobile convoy carrying several policemen.

Temur Iakobashvili, Georgia's State Minister for Reintegration, called the spy accusations and explosions "provocations", and said his country was committed to dialogue with Russia.

"There is a big difference between politics and provocation, although they both begin with the letter 'p'. It looks very much like this is a provocation and these provocations will have no consequence on the politics."

BLIND EYE

Russia has repeatedly said Georgia turns a blind eye to rebels on its territory who plot attacks in the turbulent north Caucasus region, where Russian soldiers have fought two wars since 1994 against rebels in Chechnya.

The Kremlin has made a deal with a former warlord in Chechnya and is eager to present the area as peaceful. But violence still flares sporadically in Chechnya and the neighbouring republics of Ingushetia and Dagestan.

Interfax quoted the FSB as saying the spy was a Chechen man who was born in Georgia 1974 but had Russian citizenship.

"In particular, he was to organise contact between Georgian special forces and illegal armed groups in Russia," the FSB source said.

The spy was also supposed to make contact with traffic police to guarantee rebels free movement, he said.

An FSB spokesman declined to comment. The powerful FSB often leaks information through news agencies such as Interfax.

President Mikheil Saakashvili has angered Russia with his drive to take Georgia into both the European Union and NATO.

The Interfax report did not give details on when, where and how the FSB had uncovered the alleged spy, but it did say he had worked in Ingushetia and two other southern regions. (Additional reporting by Chris Baldwin) (Writing by James Kilner; editing by Philippa Fletcher)

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