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In a threat not uttered since the Cold War, Vladimir Putin said that Russia intends to aim its missile systems - potentially nuclear weapons - at targets in Europe in retaliation for the U.S. decision to establish antimissile bases there.

During a lengthy dinner, Russia's President defended his semi-authoritarian style and insisted he is the world's only true democrat. In an interview with The Globe and Mail and a small circle of other journalists, he stressed that his country is not moving away from a market economy, refused to consider extraditing a former KGB agent charged with poisoning a dissident in London, and lashed out repeatedly at the United States and NATO for operating in countries previously within Russia's sphere of influence.

Mr. Putin's remarks, translated from Russian, virtually guarantee much of the G8 summit, due to begin in northern Germany on Wednesday, will be dominated by the growing confrontation between the West and Russia.

Mr. Putin repeatedly described U.S. antimissile bases, which will be built in the Czech Republic and Poland, both former Warsaw Pact countries, as "an element of the nuclear potential of the United States," and that the alleged threat from Iranian missiles is a myth. Washington says that the bases are purely defensive and designed to shoot down missiles launched at the United States from Iran or other rogue states.

Asked what he might do to retaliate, he said he would return to the Cold War practice of having Russian ballistic missiles programmed to strike targets in Europe - in this case, he said, the Czech and Polish antimissile sites as well as new U.S. bases in Bulgaria and Romania.

"It is obvious that if part of the strategic nuclear potential of the United States is located in Europe, and according to our military experts will be threatening us, we will have to respond," he said.

"What kind of steps are we going to take in response? Of course, we are going to get new targets in Europe."

He suggested that this could include powerful nuclear-capable weapons.

"What kind of means will be used to hit the targets that our military believe are potential threats to the Russian federation? This is a purely technical issue, be it ballistic missiles or cruise missiles, or some kinds of novel weapons systems - this is a purely technical issue."

But Mr. Putin explained at length that Russia sees itself being forced into this position - which he described as an "arms race" but said he regretted - because of the actions of the United States. In 2002, the Americans withdrew from the Anti-Ballistic Missile Treaty, and Washington has never signed the Conventional Armed Forces in Europe treaty, designed to end the Cold War military standoff.

"There is a violation, an imbalance of strategic equilibrium in the world, and in order to provide for the balance, without establishing our own antimissile defence system, we will need to establish those systems which would be able to penetrate the missile defence systems."

Russia has earlier said that it will pull out of the 1987 Intermediate-Range Nuclear Forces Treaty, designed to prevent a nuclear arms race within Europe, if the U.S. goes ahead with its antimissile base.

Mr. Putin described Russia as being penned in by NATO and U.S. expansionism. In February, he called for an end of a "unipolar world" dominated by the United States.

"We have brought all our heavy weapons beyond the Urals and we have reduced our military forces by 300,000, and some other steps," he said.

"But what do we have in return? We see that Eastern Europe is being filled with new equipment, with new military, in Romania and Bulgaria as well as radar in the Czech Republic and missile systems in Poland. So we have a question there: What is happening? What is happening is that there is the unilateral disarmament of Russia."

This week, Russia tested a new type of cruise missile designed to penetrate antimissile systems. Mr. Putin said that Russia will pursue new weapons systems to restore the "global strategic balance," but would not increase its military spending beyond average European levels.

He said, however, that he would not reciprocate by setting up bases in countries close to the U.S., such as Cuba or Venezuela: "We do not need any bases in somebody's backyard." And he added that he is not interested in establishing a Warsaw Pact-style alliance with like-minded anti-Western nations.

Mr. Putin is in his final year of the Russian presidency, under a constitution that limits him to two consecutive terms. During that time, Russia has vastly improved its economic position after the chaos and impoverishment of the 1990s, and has become a significant player in global markets. But it has also become more authoritarian, with most independent media shut down or placed under state control, dissident activities heavily curtailed and political opposition kept to the margins.

Throughout the interview, Mr. Putin addressed questions about troubling aspects of the Russian state by citing similar flaws he sees in other nations. He repeatedly quoted from the most recent Amnesty International annual report, which harshly criticized the United States for its human-rights record on antiterrorism activities and the Iraq war. And, when the flaws in Russian democracy were cited, he mentioned the 2000 U.S. presidential elections.

"Of course, I am a pure and absolute democrat," he said. "The tragedy is that I am alone. I am the only such pure democrat. There are no such other democrats in the world. Let us see what is happening in North America: Just horrible torture. The homeless. Guantanamo. Detentions without normal court proceedings."

"After the death of Mahatma Gandhi," he added, with a smile, "I have nobody to talk to."

Mr. Putin, perhaps aware of his image as a stern autocrat, joked on another very serious topic. He had explained that he fully agrees with U.S. President George W. Bush that Iran should not be permitted to develop nuclear weapons. Then he was asked if this spirit of co-operation could extend to the contentious antimissile system: If it had Russian involvement, and was operated by NATO rather than the U.S., would he find it agreeable?

"NATO is just an additional irritant element in relations with Russia," he said. "We know how decisions are made in NATO, the same way they were taken in the Warsaw Pact."

He then repeated a joke he'd heard when he was a KGB agent in East Germany: When examining the desk of East German leader Erich Honecker, which was covered with telephones, how could you tell which one was connected to the Russian-led Warsaw Pact?

"It's easy," he said, "It's the one that only has an earpiece, no microphone." And then, to make his point clear, he added: "NATO's the same, but the phone is connected not to Moscow but to Washington."

Mr. Putin was particularly eager to argue that Russia is not reverting to a state-run economy. It has recently set up large state-run enterprises to build ships and aircraft, and its main oil and gas firm, Gazprom, has the Russian state holding the majority of its shares.

But, he explained, this is simply a transitional state of affairs, and these firms, once they are competitive, will be privatized (he likened this approach to that taken by South Korea during its industrialization in the 1950s).

"So if we are speaking of creating large-scale corporations with large participation of the state ... as in shipbuilding or aviation ... we are not speaking of the returning of some privatized companies to state ownership," he said. "On the contrary, we are pulling together the spread-out assets of the state under one roof ... a lot needs to be done.

"We are going to proceed toward developing liberal market values."

The arms race was not the only standoff that became more heated during the interview. Britain last week requested the extradition of Andrei Lugovoi, the former KGB agent who British police believe was responsible for the poisoning of ex-agent and dissident Alexander Litvinenko with a radioactive isotope in London last year.

Mr. Putin refused outright to consider any extradition. "Are there possible circumstances under which Russia could extradite Lugovoi? Yes there are. And those would require amendments to the constitution of the Russian Federation."

He then said that the incident was Britain's fault, for allowing so many people to flee Russia and receive amnesty in Britain.

"After the British authorities allowed for so many thieves and terrorists to get together in their own territory, in the territory of the United Kingdom, they have created a situation which is dangerous for the nationals of Great Britain itself. And the British side is fully responsible for this development."

But Mr. Putin would not be pinned down so easily on the question of his own succession. He ruled out one subject of speculation - that he would amend the Russian constitution to give himself a third term of office (he currently has a public-opinion rating in Russia of 71 per cent).

He hinted that he might remain in Russian government, in some capacity, after he ceases to be president next March.

"I know I will be working," the 55-year-old said. "Where and in what capacity I cannot say at this point. I do have certain ideas on this count, but it is too early to speak about this at this point. Even according to Russian legislation, I have not reached my retirement age. And it would be silly just to sit at home without doing anything, but exactly what I am going to do?"

And then he added an intriguing remark: "A lot will depend on how the political process evolves in Russia toward the end of this year and in early 2008. There are different options that may be considered."

And, for perhaps the first time, he was asked why he is so rarely seen with his wife (there have been rumours in Russia, almost never published, that they have split). At first, he answered in the language of any politician: "I think that she is really looking forward to my ceasing to be the President," he said. "Because of course, presidency is a burden on the family - if for me I have the compensation as a result of my activities, then my family does not get this compensation."

Then he seemed to return to his old form, providing the sort of answer that might be expected of a former KGB man talking about his marriage: "There are no problems about that situation," he said, "and I don't expect any problems to appear."