President Dmitry Medvedev warned Tuesday that failure by Russia and the West to agree on a new missile shield for Europe could spark an arms race that would see Moscow deploy new weapons systems.

The stark warning from a president, who has a history of taking a softer line on Western policy, came during a wide-ranging state-of-the-nation address that Medvedev primarily devoted to domestic issues.

But he diverged briefly into foreign affairs to present the West with a choice -- either work with Russia on missile defence or face the consequences.

"In the coming 10 years, we are facing the following alternative," said Medvedev in nationally-televised remarks.

"Either we agree on anti-missile defence and create full-fledged, joint cooperation, or -- if we fail to reach constructive cooperation -- (we will face) a new round of the arms race," Medvedev said.

"And then we will have to make a decision on deploying new strike forces."

Russia periodically threatens to base missiles in former Soviet territories during periods of disagreement or particular sensitivity with the West.

Russia and NATO agreed in Lisbon this month to look into ways in which the two sides could work together on a new continental shield that the Kremlin has spent years resisting.

Medvedev has demanded that Russia be given an equal say in the system's operations -- a request that would require a never-before seen degree of military cooperation and intelligence sharing.

The two sides have also failed to agree on a list of countries that actually pose a threat. The United States singles out Iran and North Korea while Russia sees the two as relatively harmless for the years to come.

There have been conflicting reports about whether Russia has offered a formal joint cooperation plan to the 28-member NATO alliance.

The Wall Street Journal reported last week that Medvedev suggested that Russia take responsibility for shooting down missiles that fly over its zone of responsibility in southeastern Europe -- which would include Iran -- while NATO focuses on its western flank.

This "sectoral missile defence" approach was mentioned briefly by Medvedev during his Lisbon address -- although neither he nor other Russian officials spelled out how this system would work.

"The real question is who actually gets to press the button," said Strategic Assessment Institute head Alexander Konovalov.

"But Medvedev's proposal makes no sense -- NATO would be responsible for protecting a direction from which there are no threats."

NATO gave no immediate response to the reported offer and Russian officials later said that no formal proposal had been made.

Moscow's last threat to deploy short-range missile on NATO's doorstep near Poland came in February when the United States was still drafting its missile defence approach.

But nothing came of that warning and some analysts suggest that Medvedev's message was meant as much for domestic consumption as it was for NATO command in Brussels.

"This is an attempt to show the nation that he is a capable leader who makes his own decisions -- decisions that are no worse or even better than those made by (Prime Minister Vladimir) Putin," said Konovalov.

The Russian president has been hampered by persistent speculation that Putin wields the real power in Russia and that the prime minister was likely to retake his old Kremlin seat once Medvedev's term expires in 2012.

But others said Medvedev's comments masked a serious Russian concern -- that the shield could one day be transformed into an offensive system that rains down missiles and even nuclear bombs.

"Medvedev wants a legally-binding agreement that says that the European interceptors will never be aimed at Russia," said respected independent military analyst Pavel Felgenhauer.

He said that Russia worries that NATO could develop this capability by about 2025 -- too soon for Moscow to develop any meaningful response.

"These comments about a new arms race are just nonsense," agreed Konovalov.

"Russia simply does not have the funds to create new weapons."