Nato, the alliance set up more than a half century ago to defend the West from the Soviet Union, formally brought its old enemy out of the cold yesterday as a junior partner.

"We have come a long way from confrontation to dialogue, and from confrontation to cooperation," Russian President Vladimir Putin said before he and 19 Nato leaders, including Prime Minister Tony Blair and President Bush, signed an agreement creating a Nato-Russia Council.

"Two former foes are now joined as partners," Bush said.

Yet the new relationship has not gone down well with everyone in Russia. Baton-wielding police in Moscow clashed with demonstrators protesting at the Kremlin's rapprochement with the West. And newspapers accused Putin of capitulation.

Under the new arrangement, Russia will have more authority than in an earlier, less formal arrangement set up three years ago to try to nudge Moscow closer to the West.

Even so, its involvement will be limited to certain areas. They include crisis management, peacekeeping and such military areas as air defence, search-and-rescue operations and joint exercises. More contentious issues will be left off the agenda.

"The significance of this meeting is difficult to overestimate," Putin said earlier, noting that a few years ago, such a role for Russia "would have been, simply, unthinkable, whereas today it has become a reality".

"Being realists, we must remember that relations between Russia and the North Atlantic alliance have been historically far from straightforward," Putin said.

Even though Russia was not admitted as a full partner and has a limited role, "we must understand this Rome Declaration is only a beginning," he said.

Afterwards, US Secretary of State Colin Powell said he recognised that Russia opposed a further enlargement of Nato.

The alliance is expected to bring in up to seven new full partners in November, including states bordering Russia.

Even with the new relationship, "Russia cannot have a veto over who becomes a member or not," Powell said.

Leader after leader cited September 11, and the lingering terror threat, as a catalyst for new cohesion and determination among Nato members.

"The months since have made clear that by working together against these threats, we multiply our effectiveness," Bush said.

Putin agreed, and mentioned a blast during a holiday parade in the Russian region of Dagestan on May 9, killing 41 people. Russia blames Islamic extremists for the attack.