* Georgy Margvelashvili takes over from Mikheil Saakashvili
* PM Ivanishvili quits, names interior minister as his successor
* Prime minister post now most powerful in country
Georgian President Georgy Margvelashvili said he was ready to mend ties with Russia strained under his predecessor by a brief war and by trade disputes, but stood by the ex-Soviet state's pro-Western course at his inauguration on Sunday.
Former President Mikheil Saakashvili led Georgia in a disastrous five-day war with Russia in 2008, which cemented Moscow's control of two rebellious Georgian regions. His exit removes the main irritant in relations with Moscow.
The nation of 4.5 million is at the centre of the Caucasus, a region in which Russia and the United States are battling for influence and which hosts a major pipeline pumping oil from the Caspian Sea to Europe.
Margvelashvili was elected last month to take over from Saakashvili, who spent a decade in power pursuing friendly relations with the West often at the expense of ties with Russia.
The former Soviet republic hopes eventually to sign an association agreement, mapping out a closer relationship with the EU, despite resistance by Moscow. A more distant goal is membership in the NATO defence alliance.
"Full membership in the free world is a long-term guarantee of Georgia's national security and stable development and it can be only achieved by integration into the European Union and NATO," 44-year-old Margvelashvili said in a 12-minute speech.
"Despite current difficulties, we express our readiness to deepen our dialogue with Russia along with our European and Euro-Atlantic integration," he said.
Margvelashvili takes on a diminished post as president following constitutional changes shifting executive powers to the government and parliament that came into effect on Sunday.
Under the amendment intended to make Georgia a full parliamentary democracy, the prime minister's post is now the most powerful office in the country. Margvelashvili will be head of state and commander-in-chief of the armed forces.
Georgia's current Prime Minister Bidzina Ivanishvili has said he will quit his post after the inauguration and has named Irakly Garibashvili - the interior minister - as his successor.
Margvelashvili was brought into politics by the billionaire Ivanishvili when his Georgian Dream coalition ousted Saakashvili's cabinet in a vote in Oct. 2012. He was appointed education minister, and promoted to deputy prime minister within months.
Ivanishvili has been the driving force behind attempts to build stronger ties with Russia while at the same time also deepening integration with the West, a balancing act in foreign policy that has proved hard to pull off. Margvelashvili as his close confidant, wants to continue this course.
Russia opened its market for Georgian wine, mineral water and fruits this year, lifting a ban imposed in 2006.
But improving relations with Moscow is likely to be complicated if Tbilisi moves further out of Moscow's orbit.
Relations with its former Soviet master remain tense after Russia recognised Georgia's two breakaway regions as independent states following the war.
While U.S. and EU representatives attended Margvelashvili's swearing-in ceremony, Russian officials were not invited to the event in the courtyard of the former parliament building in the centre of the capital Tbilisi.