'A new phase in the arms race is unfolding' says Putin

Vladimir Putin has used one of the last major speeches of his presidency to deliver a defiant message to the West, accusing it of unleashing a new arms race that left Moscow no choice but to retaliate in kind. Less than a month before presidential elections that his hand-picked successor is almost certain to win, the speech removed any lingering doubts that Russian foreign policy might become less aggressive after Mr Putin steps down.

"It's clear that a new arms race is unfolding in the world," said Mr Putin, one that Russia did not start. And he vowed that Russia would respond to the threats by developing newer and more modern weapons that were as good as if not better than those possessed by Western countries. "We are being forced into retaliating ... Russia has and always will have the answers to these challenges," he said.

The speech in which he also condemned Nato expansion came as defence chiefs of the 26-nation alliance, increasingly alarmed by Russia's flexing of its military muscles, met in Vilnius, the Lithuanian capital, and urged Moscow to tone down its rhetoric.

Russian bomber patrols have recently been made over the Atlantic, Pacific and Arctic oceans and approached close to the borders of Nato airspace. Two Russian Tupolev-95 aircraft strayed south from their routine patrol pattern off the Norwegian coast and headed towards Scotland last September.

In the most recent incident, two long-range "Blackjack" bombers flew to the Bay of Biscay off France and Spain to test-launch missiles. The Russians have also hinted they want to re-establish a naval presence in the Mediterranean, probably using Syrian ports. The strategy is designed to heighten the visibility of Russia's military might but the sabre-rattling has alarmed Western countries and fuelled talk of a new Cold War.

Mr Putin went into overdrive yesterday, painting Russia as the victim of Western aggression and expansion, and promised a Russian response. He said Western countries spent far more on defence than Russia, and also returned to a theme he has raised many times before – that of Nato enlargement towards Russian borders. "We pulled out of bases in Cuba and Vietnam," he said. "And what did we get? New American bases in Bulgaria and Romania."

He also complained about US plans to build elements of a missile defence system in Poland and the Czech Republic. "They try to persuade us that all these actions are not aimed against Russia," he said, "but they have no constructive answers to our well-founded concerns."

Russia has previously threatened to deploy nuclear missiles in its Baltic exclave of Kaliningrad if the US goes ahead with its plans. Russia's annual defence spending has quadrupled since Mr Putin came to power and the Kremlin has announced a £100bn programme to modernise ageing military hardware.

Symbolically ominous changes are under way too: Russia recently announced that vast parades in Red Square to showcase the nation's military strength are to be revived this year for the first time since the collapse of the Soviet Union. Mr Putin also accused unnamed foreign countries of cynically trying to gain unfair access to Russia's natural resources. "Many conflicts, foreign policy acts and diplomatic démarches smell of oil and gas," he said. "This is the context in which we understand the growing interest towards Russia." He said the sovereignty of certain countries had been completely destroyed under slogans of freedom and democracy.

The speech was broadcast live on Russian television. Mr Putin was addressing the State Council, an influential gathering of the country's elite, including Dmitry Medvedev, the man virtually guaranteed to be Russia's next president. Also present was the Chelsea owner, Roman Abramovich, Russia's richest man, attending in his capacity as governor of Russia's Chukotka region.

Mr Putin has consistently portrayed Western attempts to foster democracy in Russia as nefarious intentions. Last month, he told the security services to beware of foreign meddling in the upcoming presidential elections, and earlier this week the Organisation for Security and Co-operation in Europe announced it would not monitor the election because of an unco-operative attitude from Russian officials.

Yesterday's bellicose remarks came at the end of a speech devoted to outlining achievements during his eight years in office and setting out a blueprint of Russia's development to 2020. He rattled off economic and social achievements over

the past eight years, boasting that Russians were now immeasurably better off than eight years ago, and laid out a development strategy to improve incomes, life expectancy, and quality of life for Russians by 2020.

Bizarrely, Mr Putin made no reference in his speech to the fact that the presidency will soon be changing hands, and spoke repeatedly of what "we" need to do.

Mr Medvedev, who is virtually certain to win the elections on 2 March, has asked Mr Putin to stay on as prime minister