Tony Blair yesterday warned President Vladimir Putin that the West was becoming "worried and fearful" of Russia's foreign policy.

During a very frank exchange, aides were asked to leave the room while the Prime Minister told Mr Putin what he thought of Russia's external policy. In turn, the Russian leader told him that his country was not being treated properly by the West.

Speaking before he left Germany from what will be his last G8 summit, Mr Blair said: "It was a very frank discussion. It went through all the issues you would expect us to go through and we set out each other's views, which are well known.

"The atmosphere on a personal level was perfectly cordial but there are real issues there and I don't think they will be resolved any time soon," he disclosed.

Mr Blair has not hidden his exasperation at Russia's failure to observe human rights in Chechnya, or their point blank refusal to consider the extradition of ex-KGB agent Andrei Lugovoy, accused of murdering Alexander Litvinenko in London, but he was incensed at Mr Putin's recent threat to point missiles at Eastern Europe if the US sited a US missile shield in the Czech Republic.

Mr Blair revealed that he had brought up the three issues, among others, during their talks.

In an earlier meeting with George W Bush, the US President, Mr Putin stole a march by suggesting a joint plan to base part of the missile system at a former Soviet radar station in Azerbaijan.

He declared that if Washington agreed to his plan he would not have to carry out his threat to retarget Russian missiles against Europe.

Mr Putin defiantly refused to bend to the G8's agenda on Kosovo and he accused the leaders of the world's richest countries of denying Serbia its inalienable right to self-determination.

Railing against his colleagues at a press conference at the close of the three-day G8 summit, the Russian President said: "This process (of allowing the large ethnic Albanian population to break away from Serbia) cannot be without the consent of parties involved - in this case, the Serbian side.

"We need to stick to the rule of international law rather than impose our will on other countries and humiliate other peoples. The principle of self-determination is more important than the territorial integrity of states.

"We should be guided by this principle in all regions of the world, not only in regions where our partners liked it to be employed.

"The right to self-determination should be given both to the people of Yugoslavia and to the people in post-Soviet spaces. There is no difference between the two," he argued.

Mr Putin welcomed the US shift on climate change but criticised them for their belated engagement on the issue.

He said: "First, we agreed that everything that has been stipulated in the post-Kyoto agreement will be observed, at least by those countries who have signed, and ratified, Russia is among those countries.

"What is most important is that we have managed to involve other countries in discussion, some of whom are the main polluters."

Mr Putin also said the joint missile defence plan he proposed could include interceptor missiles hosted by other Nato members such as Turkey. In an abrasive dig at America's problems in Iraq, he added: "Or it could be Iraq - what they have waged the war for? There would be at least some benefit coming out of it."

All European countries could join consultations on a joint US-Russian missile defence system, Mr Putin said.

"We are proposing to create a pool of European nations to assess missile threats through 2020 and agree on a joint action to fend off these threats," he said.

Mr Bush was noncommittal and the two leaders said they would leave it to military experts to discuss the initiative before again discussing it during their planned meeting at Kennebunkport, Maine, in the United States in early July.