U.S. President Barack Obama has told east European states he is backing away from plans for an anti-missile shield there, in a move that may ease Russian-U.S. ties but fuel fears of resurgent Kremlin influence.
Russia said it would welcome abandonment of the plans, which have been a major source of Russian-U.S. tensions.
Poland said Obama would announce a final decision later on Thursday (1400 GMT) on the project, focus of multi-billion dollar contracts contested by U.S. defence giants.
The shield, involving interceptor missiles in Poland and a radar complex in the Czech republic, was promoted by Obama's predecessor George W. Bush to defend against any missile launches from "rogue" states such as Iran and North Korea.
"Today, shortly after midnight, Barack Obama telephoned me to announce that his government is backing away from the intention of building a missile defence radar on Czech territory," Czech Prime Minister Jan Fischer told reporters.
"The Czech Republic acknowledges the decision."
A senior Polish source close to the negotiations told Reuters Warsaw had received a similar message. "We will not have the interceptors for now."
A U.S. defence official said Washington was now examining an alternative to the "large, fixed system" of the shield. This would target short- and medium-range missiles rather than the long-range rockets seen until now as the threat.
He gave no details.
The Wall Street Journal newspaper said Washington had decided Iran was not as advanced in developing long range missiles as it had previously thought.
The Obama administration seeks to "reset" battered ties with Russia so that the two former Cold War foes can cooperate on Iran, on fighting Taliban insurgents in Afghanistan and on reducing their vast arsenals of nuclear weapons.
Russia is allowing the United States to move trains carrying supplies for U.S. forces across the country via Central Asia to Afghanistan, avoiding routes through Pakistan that had come under frequent attack from the Taliban.
Washington also wants Russian support in economic sanctions against Tehran, which it accuses of developing nuclear weapons.
Diplomats in Moscow say Russian hardliners could read the shield backdown as a sign of U.S. weakness. Far from doing the bidding of the United States, they may instead press for further gains to shore up Russian power in the former Soviet bloc.
Eastern European states, especially Poland and the Baltic states, saw the missile plan as a symbol of U.S. commitment to the defence of the region against any encroachment by former Soviet masters 20 years after the collapse of communist rule.
IRANIAN MISSILES
Some east Europeans see Russia's brief war with Georgia last year and confrontations with Ukraine over gas supplies as symptoms of a Russian 'neo-imperialism' driven by a view of eastern Europe as belonging to Moscow's sphere of influence.
"This would be very bad," said Witold Waszczykowski, deputy head of Poland's National Security Bureau which advises President Lech Kaczynski. "Without the shield we would de facto be losing a strategic alliance with Washington."
Ignoring U.S. assurances that the system was not targeted at Russia, President Dmitry Medvedev threatened last year to station missiles in a Russian enclave near Poland if the United States implemented the plan.
For Poland, the timing of the announcement is particularly sensitive. Thursday marked the 70th anniversary of the Soviet invasion of eastern Poland following a pact between Moscow and Nazi Germany, an event seen by Poles as "a stab in the back".
"I hope this is just a coincidence," said Waszczykowski.
The West is also concerned about Iran's nuclear research programme, which it believes is a cover for development of an atomic bomb. The Islamic Republic says it wants to use nuclear technology only for power generation and to allow it to export more oil and gas for foreign currency.
A senior Iranian government source said the move could signal a move away from what he called 'threats and confrontation'.
"There could be two reasons behind such a decision; either the U.S. has reached the conclusion that Iran is not a threat, or the Russians may have convinced the Americans that there is no need for such a defence shield."
Multi-billion dollar contracts contested by U.S. defence giants are at stake in the future of U.S. missile defence plans.
Boeing Co, the Pentagon's No.2 contractor, last month unveiled a proposal to build a mobile interceptor missile in a bid to blunt Russian fears of U.S. fixed sites in Europe.
Boeing, which manages the hub of a layered U.S. anti-missile shield deployed in 2004, was eyeing a 47,500-pound interceptor that could be flown to NATO bases as needed.
