March 15 (Bloomberg) -- Russia will take ``military measures'' to counter the U.S. plan to install a missile- defense system in Central Europe and the Caucasus, Deputy Foreign Minister Alexander Losyukov said.

``Expansion of that kind into the area which is absolutely right next to our borders is increasing the military potential in that area,'' Losyukov said in an interview at the Foreign Ministry in Moscow yesterday. ``Russia cannot but react to that increase.'' He didn't specify what measures Russia would take.

The U.S. is negotiating to base interceptor missiles in Poland and a radar station in the Czech Republic, both former Soviet allies, to guard against long-range missile attacks from countries such as Iran. Air Force Lt. Gen. Henry Obering, who heads the U.S. Missile Defense Agency, said March 1 he would like to have an additional radar station in the Caucasus, until 1991 part of the Soviet Union.

``Whether those things are done with good intentions or bad, it doesn't matter, it increases the hypothetical threat'' to Russia, said Losyukov. ``We are reacting to that and will be reacting to that in terms of taking necessary military measures.''

``You can be 100 percent sure that our public is not approving those actions,'' said Losyukov, 63, speaking in English, honed during a stint as ambassador to Australia.

The commander of Russia's strategic air force, Lt. Gen Igor Khvorov, told the state-run RIA Novosti news agency March 5 that Russian bombers had the ability to destroy any missile- defense sites or disarm them electronically.

`No More Balance'

Russian President Vladimir Putin told a defense conference in Munich Feb. 10 the missile shield would ``completely neutralize'' the deterrent threat posed by Russia's own nuclear missiles. ``There will be no more balance of power,'' he said, adding that Russia will aim to produce weapons of its own to ``overcome'' such arms systems.

U.S. Secretary of State Condoleezza Rice, visiting Moscow Feb. 21, rejected the accusations that the missile-defense system would pose a threat to Russia and said there had been ``a lot of consultations'' with Putin's government.

Obering sought to allay Russian concerns in comments to reporters in Berlin today.

`Very Aggressive'

``What is changed here is the very aggressive development and testing of missiles by Iran,'' Obering said. ``We have to move to address that threat in a fairly timely manner.''

Losyukov's policy brief on the Asia-Pacific region covers Iran, and he said Russia would prefer negotiations to sanctions to increase pressure on Iran to halt uranium enrichment.

Vitaly Churkin, Russia's ambassador to the United Nations, said in New York last night the five permanent members of the UN Security Council had agreed to take ``additional restrictive measures'' against Iran, whose nuclear program the U.S. and its European allies say is intended to produce nuclear weapons.

``We don't want nuclear armaments in this area, which is very close to our borders,'' Losyukov said.

Russia's state-run ZAO Atomstroyexport, which is building Iran's first nuclear power plant at Bushehr, threatened to halt construction March 13, saying Iran was delaying payment.

Asked if this was a political decision, Losyukov said: ``The problem of payment is a minor problem actually. If someone has to pay it can be achieved pretty easily, and that would be resolved.''

`Arduous Road'

Losyukov will fly to Beijing March 17 to take part in six- nation talks on the details of a plan to end the nuclear- weapons program of another Russian neighbor, North Korea.

``It will be an arduous road, a difficult endeavor,'' said Losyukov.

On Feb. 13, the six countries, which also include the U.S., China, Japan and South Korea, agreed on an accord which would reward North Korea with oil and aid for stopping and ultimately disabling its plutonium-producing reactor at Yongbyon.

In 1945, the Soviet Union was the major patron of the new Communist government in North Korea. Today Russians, who share a short land border with North Korea, are alarmed at the prospect of a nuclear-armed neighbor, Losyukov said.

``Nobody in Russia is happy to know that very close to our borders there is a full-scale crisis with a pretty good potential of further aggravation,'' he said.

Should the two Koreas become reconciled, Russia would extend energy aid and business investment to the North, Losyukov said.

Trans-Siberian

``We can construct power lines and send energy to North Korea, probably build some gas pipelines,'' he said. Russia continues to talk with North Korea about allowing freight trains to cross from Russia through the North to South Korea, a link that would add traffic to the Trans-Siberian Railroad.

Turning to Russia's most important neighbor, China, Losyukov said the visit to Moscow on March 26 of Chinese President Hu Jintao will highlight growing trade and investment between the two neighbors. For Russia east of the Urals, China has become in recent years the dominant trading partner.

China and Russia share the longest land border in the world. Asked if Russia's government is worried about China's rising military expenditure, Losyukov said: ``We don't think that the military growth of China is disproportionate to its economic and other growth.''

Losyukov noted that China has been a key market for Russian defense exports in recent years.

``We don't feel a Chinese military menace, we don't see it,'' Losyukov said. ``We are convinced that there is a better potential in developing economic trade.''

To contact the reporter on this story: James Brooke in Moscow at jbrooke2@bloomberg.net.

Last Updated: March 15, 2007 11:07 EDT