President Vladimir Putin said yesterday a new global arms race was starting and Russia was "forced to retaliate" with new, high-tech weapons.
In a tough speech outlining his vision for Russia to 2020, Vladimir Putin accused the West of ignoring Moscow's concerns on security by expanding the Nato military alliance to its borders and deploying a missile defence system in Central Europe.
"It is already clear that a new arms race is unfolding in the world. It's not our fault, we didn't start it," Mr Putin told government, business and military leaders at the Kremlin, three months before his presidency is due to end.
"In effect, we are forced to retaliate... Russia has and always will have a response to these new challenges," he added.
Apparently referring to plans for new nuclear-capable missiles, Mr Putin said "over the next few years Russia will start production of new types of weapons which... are in no way inferior to what other states have and in some cases are superior".
Mr Putin also said there was a "fierce fight" for natural resources around the globe and many conflicts and foreign policy actions "smell of oil and gas". Moscow needed to be on its guard against attempts to get access to its resources, he added.
"Under the disguise of turgid declarations about freedom and open society, sometimes the sovereignty of certain states and whole regions is being destroyed," Mr Putin said, in an apparent reference to US policy in the Middle East and in particular the war in Iraq.
Speaking ahead of presidential elections next month which are widely expected to be won by his chosen successor Dmitry Medvedev, Vladimir Putin attacked foreign countries for "immoral and illegal" attempts to interfere in Russia's domestic affairs.
The West's main election watchdog, the ODIHR, said on Thursday it was scrapping plans to monitor Russia's presidential election because of restrictions by Moscow on the number of observers and the amount of time they could work.
Western countries have criticised democracy in Russia, saying the Kremlin's dominance over the airwaves and its liberal use of government resources to help official candidates make it impossible for the opposition to compete fairly. Mr Putin said democracy was a "cornerstone" of Russian society.
Although President Putin's speech was billed in Russian media as a blueprint for Mr Medvedev to follow, the President did not mention his successor by name in his 50 minutes of remarks or refer to the next government. There were few specific policy details.
President Putin has said he intends to stay active in politics and will become Prime Minister under Mr Medvedev.
But many analysts find improbable the scenario of an all-powerful, popular leader such as Mr Putin voluntarily handing over the reins to a loyal subordinate and taking a lesser position himself.
Mr Medvedev, sitting among Cabinet members in the front row of seats in the Kremlin's St George Hall, listened attentively as Mr Putin hailed Russia's ðeconomic growth and stability during his eight years in power and called for fresh efforts to wean the ðeconomy off its dependence on exports of raw materials.
He hailed the new-found strength of the Russian economy, pointing to a boom in investment, state coffers which are now full and gross domestic product growth of over eight per cent a year.
But Mr Putin also conceded that the economy was "still very ineffective" and criticised the lack of progress in turning Moscow's large scientific research programme into concrete technological advances.
Around 80 per cent of Russia's exports are raw materials and imports are rising rapidly, threatening to tip the country's trade balance into the red within three years.