* Georgia to initial deal on Friday for closer ties with EU
* Says will not let Ukraine's example deter its efforts
* Georgia will still work to improve ties with Russia
TBILISI, Nov 27 (Reuters) - Five years after it fought a war with Russia, Georgia is preparing to defy its former Soviet masters again by initialling an accord on strengthening ties with Europe.
New Prime Minister Irakly Garibashvili is toughing it out just a week after another former Soviet republic, Ukraine, bowed to pressure from Moscow and suspended plans to strike a similar deal with the European Union.
The South Caucasus country's economy is much smaller than Ukraine's but it is important to the EU because it hosts pipelines that carry Caspian gas and oil to Europe.
"Ukraine's decision is very unfortunate, but Ukraine and Georgia are different stories as we are much less dependent on Russia than Ukraine is," Garibashvili told Reuters in an interview in the Georgian capital Tbilisi.
"Russia may use political and economic leverage to put pressure on Georgia, but I believe that it cannot be serious."
Like Ukraine, Georgia is trying to strike a balance between East and West but finding it hard to strengthen ties with Europe without upsetting Russia.
Moscow is anxious to maintain its influence over states it dominated during Soviet times, especially those with energy pipelines and significant ethnic Russian communities.
Despite Russia's concerns, Tbilisi will initial the accord on deepening trade and other cooperation with the EU on Friday at a summit in the Lithuanian capital of Vilnius.
It expects to sign the final agreement next year and hopes Moscow will adopt a warmer policy towards it as it tries in the long term to join NATO and the EU.
"I think that in the long run it's in Russia's interests to resolve political disputes between our countries," he said.
The Russian Foreign Ministry stepped up pressure on former Soviet republics hoping to move closer to Europe on Tuesday by warning that they would face "years of economic turmoil", including higher unemployment and lower living standards.
Moldova, another former Soviet republic, is also defying the warnings and will initial an agreement on closer ties with the EU in Vilnius.
Ukraine had been expected to sign an association agreement in Vilnius, allowing it to join a free trade area with the bloc. But after months of Russian warnings over gas supply cuts and trade restrictions, Kiev changed its mind last week and said it would rebuild economic ties with Moscow instead.
TENSIONS HIGH WITH RUSSIA
Garibashvili, who became prime minister last week, said his country of 4.5 million should not be seen in the same light as Ukraine, whose population is 10 times bigger.
Georgia is further from Moscow's orbit than Ukraine and underlined its independence in 2008 by withdrawing from the Moscow-led Commonwealth of Independent States, the political bloc created as the Soviet Union fell apart.
In a sign that ties could finally be improving, Russia this year lifted bans on imports of Georgian wine, mineral water and fruit that were imposed in 2006.
Even so, tensions remain high after the August 2008 war over two Moscow-backed breakaway regions. Diplomatic relations, severed after the war, have not been restored and Russia still controls the two separatist-minded regions.
But Garibashvili made clear he was not about to be cowed by Russia, saying: "Twenty percent of our territory is occupied, and Russia has already recognised the independence of Abkhazia and so-called South Ossetia. What else they can do?"
Garibashvili is a close ally of Bidzina Ivanishvili, who quit this month as prime minister, saying his job was done now that his rival Mikheil Saakashvili was no longer president.
Georgia will be represented in Vilnius by President Georgy Margvelashvili, who was elected last month, but the prime minister's post is the most powerful in the country.
Garibashvili, a former interior minister, not only faces a tough task soothing Russian concerns but also addressing the EU's worries about Georgia's credentials.
The EU is alarmed by the arrest of several former ministers and other officials, including former prime minister Vano Merabishvili, since Ivanishvili's Georgian Dream coalition ousted Saakashvili's party at the polls in 2012.
The EU has urged Georgian leaders to avoid the "politics of revenge" - a remark that echoes its concerns about "selective justice" in Ukraine, which has refused to release jailed former prime minister Yulia Tymoshenko.
"Vano Merabishvili and Yulia Tymoshenko are totally different stories," Garibashvili said. "Some of our European partners may have questions, but we'll make sure that this trial (against Merabishvili) is absolutely transparent."
Merabishvili, a Saakashvili ally, is being tried for alleged vote-buying before last year's parliamentary election and other crimes.
(Reporting by Margarita Antidze; Editing by Timothy Heritage and Will Waterman)