Vladimir Putin accused the West of triggering a fresh arms race today and gave warning that Russia was now rich enough to respond with a new generation of high-tech weaponry.

President Putin attacked the United States and Europe for expanding Nato close to Russia's border at a time when Moscow had closed military bases abroad. He said that Russia would stand up to the West and defend itself against US plans to establish a missile defence shield in Eastern Europe.

“A new arms race has started to unfold,” Mr Putin told ministers and regional governors in a televised address. “It's not our fault, we didn't start it...funnelling multibillions of dollars into developing weapons systems.

“We are being forced to take retaliatory steps. Russia has, and always will have, a response to these new challenges. In the near future, Russia will start production of new weapons systems that will not be inferior and in some cases excel those held by other countries.”

Mr Putin also accused Western governments of seeking to gain control of the vast energy reserves that have fuelled Russia's booming economy. He said: “Many conflicts, foreign policy actions and diplomatic moves smell of oil and gas. Behind all that there often is a desire to enforce an unfair competition and ensure access to our resources.”

The President has clashed repeatedly with the US over its plan to install ten interceptor missiles in Poland and a radar station in the Czech Republic. Washington says that the shield is intended to prevent attacks from rogue states such as Iran, but Moscow insists that its own security is threatened.

Mr Putin is also at odds with the West over independence for Kosovo. He pulled Russia out of a landmark European arms control treaty in December after accusing Nato of bad faith in failing to ratify the agreement.

“Nato itself is expanding. It's approaching our borders. We drew down our bases in Cuba and in Vietnam. What did we get? New American bases in Romania, Bulgaria,” Mr Putin told the State Council.

In a combative speech, he also set out plans for Russia's development until 2020 in a clear indication that he intends to remain in control long after the election as president on March 2 of his anointed successor, Dmitri Medvedev. He plans to serve as Prime Minister under Mr Medvedev, who is campaigning on a promise to continue “Putin's Plan”.

Mr Putin said that Russia was respected again after his eight years in power, adding: “I know there is a lot left to do, but the course has been set.”

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