Georgia has accused Russia of moving towards the de facto annexation of its territory, after the Kremlin announced a far-reaching military agreement with the breakaway Georgian province of Abkhazia on Monday.

Under a treaty signed by Vladimir Putin and Abkhazia’s leader – both former KGB officers – a Russian commander will lead a new joint force of Russian and Abkhaz troops. Abkhazia also agreed to harmonise its foreign and defence policies with Moscow’s. Putin promised subsidies to the lush coastal Black Sea enclave, amounting to $270m (£170m) over the next three years.

“I’m sure cooperation, unity and strategic partnerships between Russia and Abkhazia will continue to strengthen,” Putin said. Abkhazia’s president, Raul Khadzhimba, added: “Ties with Russia offer us full security guarantees.”

The move comes seven months after Putin annexed Crimea and launched a covert military invasion of eastern Ukraine. It will raise fears that Putin’s expansionist project – he has promised to “defend” ethnic Russians who live outside the borders of the Russian Federation – is a work in progress.

Russia has based troops in Abkhazia for more than two decades, ever since the micro-republic broke away from Georgia in 1992-93 in a bloody separatist war. In 2008, Georgia’s president, Mikheil Saakashvili, launched an ill-fated attempt to grab back Georgia’s other rebel territory of South Ossetia. Russia responded with a full-scale military invasion of Georgia. It later recognised both Abkhazia and South Ossetia as independent states.

The latest treaty appears to be Putin’s riposte to a cooperation deal signed earlier this summer between Georgia and the EU. Moscow’s counter-deal envisages that Abkhaz pensions and social benefits will rise to the same level as Russia’s. It also increases Russia’s control of the Black Sea region, which has long been of strategic importance to Moscow. Putin justified his land-grab of Crimea by saying this would prevent Nato warships developing bases on the peninsula, which is home to Russia’s Black Sea fleet.

Georgia’s foreign ministry denounced the new agreement as a “step toward the de facto annexation” of Abkhazia. Nato’s secretary general, Jens Stoltenberg, condemned the treaty and said the alliance strongly supported Georgia’s sovereignty.

“This so-called treaty does not contribute to a peaceful and lasting settlement of the situation in Georgia,” Stoltenberg said. He added: “On the contrary, it violates Georgia’s sovereignty and territorial integrity, and blatantly contradicts the principles of international law, OSCE [Organisation for Security and Cooperation in Europe] principles and Russia’s international commitments.”

The EU’s foreign policy chief, Federica Mogherini, said the deal damaged attempts to stabilise regional security.

The US also said it would not recognise Russia’s move and expressed continued support for Georgia’s territorial integrity.

“The United States will not recognise the legitimacy of any so-called ‘treaty’ between Georgia’s Abkhazia region and the Russian Federation,” the US. state department said.

Abkhazia’s former leader, Alexander Ankvab, was forced to step down earlier this year under pressure from protesters who reportedly were encouraged by the Kremlin. Khadzhimba, a former Soviet KGB officer, was elected president in an early vote in August that Georgia rejected as illegal.

Unlike Ankvab, who had resisted Moscow’s push to let Russians buy assets in Abkhazia, Khadzhimba has appeared more eager to listen to Russia’s demands. Wealthy Russians have bought large chunks of land and property in Abkhazia, which was a popular holiday resort in Soviet times both for members of the politburo and for ordinary citizens.

In Georgia’s capital, Tbilisi, 30,000 opposition protesters demonstrated earlier this month against an earlier draft of the treaty. The ruling Georgian Dream bloc led by Russia-friendly billionaire Bidzina Ivanishvili, which unseated Saakashvili’s party in the 2012 vote, has sought to repair ties with Moscow. But while economic relations have improved, political ties have remained frozen because of Moscow’s refusal to compromise on the status of Georgia’s separatist regions.

Saakashvili’s United National Movement party has accused the Georgian government of kowtowing to Moscow.

“The Georgian government has done practically nothing,” said the party leader, David Bakradze. He urged the government to join western sanctions against Russia and to opt out of political talks with Moscow.

The deal with Abkhazia appears to reflect Moscow’s concerns that Saakashvili’s party could mount a political comeback and push for stronger ties with the west. The agreement, posted on the Kremlin website, envisages a joint defence and security space, and stipulates Russian “protection of the state border of the Republic of Abkhazia with Georgia”.