Russia held out an olive branch to President Barack Obama today by suspending plans to deploy missiles in Europe, according to a report in Moscow.

An official from Russia's General Staff in Moscow told Interfax news that the move had been made because the new United States leadership was reconsidering plans to establish a missile defence shield in eastern Europe.

Deployment of Iskander short-range missiles, which can carry nuclear warheads, was being suspended in Russia's Baltic exclave of Kaliningrad in response, the unidentified official said.

The news emerged ahead of Prime Minister Vladimir Putin's appearance later today at the annual meeting of the World Economic Forum in Davos, Switzerland.

Putin said on Monday that he was "cautiously optimistic" about the potential for improved relations with the U.S. because the Obama Administration had shown a willingness to reconsider the missile shield.

The former Bush administration ignored Russian objections to its plan to install 10 interceptor missiles in Poland and a radar station in the Czech Republic.

It said that the shield was to counter threats from rogue states such as Iran and was not directed against Moscow. The U.S. signed agreements with the Czech and Polish governments last year to permit deployment of the shield.

Russia insisted, however, that the system posed a threat to its own security and repeatedly warned that it would take counter measures unless the U.S. backed down.

President Dmitri Medvedev ordered Iskander missiles to be placed in Kaliningrad in a speech made the day after Obama's election as president last November. It would have been the first deployment of offensive missiles inside Europe since the end of the Cold War.

"These plans have been suspended because the new US administration is not pushing ahead with the plans to deploy... the U.S. missile defence system in Poland and the Czech Republic," the General Staff official told Interfax.

"Russia does not need to deploy Iskanders in the Kaliningrad region if the U.S. does not install its missile defence facilities in Eastern Europe."

There was no immediate official confirmation from Russia's Defense Ministry of the change in policy. But it would come at a critical moment as Obama seeks to engage Iran to dissuade the Islamic regime from continuing with plans to develop a nuclear bomb.

Russia is building Iran's $1 billion Bushehr nuclear power plant. Deputy foreign minister Alexei Borodavkin told the Iranian ambassador to Moscow last week that Russia wanted to broaden "political, trade and economic cooperation".

Russia delivered 82 tons of low-enriched uranium fuel for the plant in southern Iran last year. Atomstroiexport, the Russian state company building the project, announced recently that operation of the plant would become "irreversible" once scheduled work was completed next month.

Obama and Medvedev spoke by telephone on Monday. A Kremlin spokesman said that their conversation had "touched on the necessity of developing cooperation and coordination between Russia and the USA in dealing with the most important common challenges".

Medvedev used his first state-of-the-nation address last November to appeal to the new U.S. President to "make a choice in favour of full-fledged relations with Russia". He complained that Moscow had repeatedly sought cooperation with partners in the West but that "they, unfortunately, don't want to listen to us".