The President added that despite the current financial problems, “we have all the necessary capabilities”.

The number of military practice manoeuvres carried out each year will also be increased.

“Many types of exercises have been held for the first time over a certain long period, or even in the entire history of the Armed Forces,” Medvedev said. He added that the number of those exercises is still insufficient.

“Only exercises similar to real combat operations can enhance the skill and combat readiness of military units. This is something we should never hesitate to spend money on,” said the President.

A smaller, better armed and more flexible armed force – that’s what Russia needs to respond to growing threats from outside, according to Medvedev.

“There still remain the threats coming from local conflicts as well as from international terrorism. Attempts to expand NATO close to the borders of our country have not been stopped. All of this demands a new perspective and quality modernization for our armed forces,” Medvedev noted during a media conference.

The eastward expansion of the military alliance is a principle concern for Russia. Even before the Baltic States joined NATO the alarm bells were ringing.

But the prospect of the former Soviet republics of Ukraine and Georgia gaining NATO membership is more than Moscow can bear.

“Medvedev just wanted to remind that NATO's key purpose is to counter terrorism and not to enlarge and go further to the East,” commented Viktor Litovkin from the “Independent Military Review” newspaper.

To make matters worse, the U.S. is planning to install a missile shield in Eastern Europe, to which Russia is adamantly opposed.

Such a combination of factors motivated the Kremlin to modernize its forces and to advertise the fact that it was bulking up its deterrence.

“The primary goal is to improve the combat readiness of our troops – a substantial one, mainly in the area of strategic nuclear arms,” Medvedev pointed out.

The new administration in Washington has been sending broadly positive signals, saying it wishes to reset the bilateral relationship.

However, despite the goodwill, some analysts are skeptical the two sides will able to compromise on the sharpest issues.

Medvedev is due to hold his first face-to-face meeting with Obama in London at the G20 summit at the beginning of April.

What was likely to be a complex dialogue has now been given an extra twist by Russia’s new military agenda.