With the ink barely dry on a deal for the Czech Republic to host part of the controversial US system, Russian President Dmitry Medvedev expressed Moscow's dismay.

"We are most distressed by this situation," he told reporters at the end of the Group of Eight summit in Japan.

"Russia isn't going to get hysterical but will be studying countermeasures," Medvedev said, just two days after US President George W. Bush hailed him as "a smart guy" who means what he says.

Medvedev warned the installation of the shield could diminish his country's deterrent capacity. But at the same time, the Russian leader said, "We are not opposed to further negotiations."

Moscow on Tuesday warned of a possible military response if Washington erects components of the system on its Cold War turf, hours after US Secretary of State Condoleezza Rice signed a deal in Prague to do just that.

"If a US strategic anti-missile shield is deployed near our borders, we will be forced to react not in a diplomatic fashion but with military resources," the Russian foreign office said in a statement.

"There is no doubt that the grouping of elements of the strategic US arsenal faced towards Russian territory" could lead Moscow to "take adequate measures to face the threats to its national security," it added.

The deal with Prague permits a tracking radar station and American troops on Czech soil as part of a system Washington says aims to blunt the possible missile threat from "rogue" states like Iran or North Korea.

The last Russian president, Vladimir Putin, who had a more confrontational style, had threatened to point Russian missiles towards any nations that allowed the US shield on their soil.

The United States also wants a radar system twinned with 10 interceptor missiles in neighbouring Poland, although negotiations with Warsaw have become bogged down with Polish demands for additional security guarantees.

Rice pounced on Iran's test of its Shahab-3 missile, which came amid growing fears that the standoff over the Islamic republic's contested nuclear drive could lead to war.

"It's evidence that the missile threat is not an imaginary one," she said.

The Shahab-3 was among a broadside of nine missiles fired off in the early morning from an undisclosed location in the Iranian desert, state-run Arabic channel Al-Alam and its English counterpart Press-TV reported.

The White House, which sharply condemned the missile test, firmly dismissed the Russian foreign ministry warning while urging Moscow to join the planned missile defence as "equal partners" with the United States and Europe.

"We seek strategic cooperation on preventing missiles from rogue nations like Iran from threatening our friends and allies," said White House spokesman Gordon Johndroe. "We will continue to have a dialogue with the Russians."

Chief Bush spokeswoman Dana Perino later strongly suggested that the Russian ministry was at odds with its president, saying that Medvedev had promised Bush to pursue dialogue on the issue.

"I wouldn't say we don't take it (the warning) seriously, but I think that what's more important is what President Bush and President Medvedev said together here -- that there is a desire to work together in a cooperative effort," she said.

"Feelings that run deep like that don't necessarily change overnight," Perino told reporters, adding that "comments from that ministry have been similar in the past."

Asked whether Medvedev himself had raised the prospect of a military response, Perino replied: "Not as I recall it, no. I think I would remember it if he had, and I don't recall it that way at all."

Perino also reiterated that Moscow's missile arsenal "absolutely dwarfed" the defensive system's interceptor abilities.

Some US officials, however, say privately that Moscow is more worried about the radar system, fearing that it could be pointed into Russia for intelligence-gathering purposes.

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