By Adrian Croft

BRUSSELS (Reuters) - NATO chief Anders Fogh Rasmussen said on Wednesday it was unacceptable for Russian forces to put up a fence on the border of Georgia's breakaway province of South Ossetia, believing it could further inflame tensions in the region.

But he also chided Georgia, which wants to join NATO and the European Union, over the arrest of former officials.

The Georgian Foreign Ministry voiced concern last month over the installation by Russian forces of a barbed wire fence on the boundary between Georgia and South Ossetia, the focus of a brief 2008 war between Georgia and Russia.

"Building such fences is a violation of international law," Rasmussen told a news conference, after NATO defense ministers met their Georgian counterpart in Brussels.

"Building fences impedes freedom of movement, it can further inflame tensions, it is simply not acceptable and we urge Russia to live up to her international obligations."

An independent report commissioned by the European Union in 2009 blamed Georgia for starting the war with Russia, but said Moscow's military response went beyond reasonable limits and violated international law.

Since the conflict, Moscow has recognized South Ossetia and another rebel province, Abkhazia, as independent states.

Rasmussen also criticized Georgia over recent arrests.

Last month, former Georgian prime minister Ivane Merabishvili was arrested on corruption charges in what the opposition said was a witch-hunt against members of the ousted administration of President Mikheil Saakashvili.

Dozens of former officials, including a former interior minister, have been arrested since billionaire Bidzina Ivanishvili led an opposition coalition to election victory over Saakashvili's long-ruling party last October.

They have been charged with abuse of power, corruption, illegal confinement or illegally obtaining personal information.

Rasmussen said NATO was "following these developments with great concern."

He said he and NATO ministers had told Georgian Defense Minister Irakly Alasania they expected Georgia to "fully respect the fundamental principles of rule of law and (to) guarantee due process."

"We have made clear that even the perception of politically motivated arrests should be avoided," he added.

He urged Georgia to push ahead with key reforms and to hold free and fair presidential elections in October.

NATO promised the small Caucasus republic eventual membership at a summit in 2008, but the mood cooled after its war with Russia.

Nevertheless, Alasania told Reuters Georgia hoped to take "another solid step" towards NATO at an alliance summit next year.

Rasmussen said decisions taken at the 2008 summit remained valid. "Georgia will become a member of NATO provided it fulfills the membership criteria," he said.

With over 1,500 soldiers serving in Helmand province, Georgia has the largest non-NATO combat troop commitment in Afghanistan.

Alasania said Georgia was committed to remaining part of NATO's training and advisory mission that will replace the current combat mission after the end of 2014.

(Additional reporting by Margarita Antidze in Tbilisi; editing by Mike Collett-White)