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Here is what Russian President Medvedev had to say in his state of the Union address last night after it was announced Obama won the election.

Medvedev Confronts U.S. on Missiles After Obama Win (Update1)

By Sebastian Alison and Lyubov Pronina

Nov. 5 (Bloomberg) -- Russian leader Dmitry Medvedev said he would deploy new missiles in Europe, confronting the U.S. hours after Barack Obama won the American presidential election.

Medvedev said he would place a short-range Iskander missile system in Russia's exclave of Kaliningrad, wedged between Poland and Lithuania, to ``neutralize'' a planned U.S. missile-defense system ``if necessary,'' Medvedev said. A radio-jamming installation in Kaliningrad will also be aimed at elements of the U.S. system in Poland and the Czech Republic, he said.

In the annual state-of-the-nation address today in the Kremlin, Medvedev avoided mentioning Obama while highlighting areas of tension between the two countries. Russian-U.S. ties are at their frostiest since the end of the Cold War, frayed by the planned missile shield, the war in Georgia and the U.S. push to admit Georgia and Ukraine to the North Atlantic Treaty Organization.

``This is a warning to Obama -- a bright, clear warning -- that tough negotiations are ahead,'' Alexander Rahr, a Russia expert at the German Council on Foreign Relations in Berlin, said by telephone. Medvedev's ``fist-waving'' on the missile shield may be premature, since Obama has shown less support for the system than President George W. Bush, Rahr said.

Missile Shield

While Obama's positions on the war in Georgia and NATO's eastward expansion are similar to those of the Republican candidate, John McCain, and Bush, he has indicated greater flexibility on the missile shield.

Obama said he'll back the plan ``if it works and if it can be financially feasible,'' Michael McFaul, a Russia specialist at Stanford University who advised Obama during the campaign, said in an interview last month.

While announcing Russia's long-promised military response to the U.S. missile shield, Medvedev also expressed hope that Obama, unlike Bush, would engage with Russia on issues of common interest.

``Progress in Russian-American cooperation would be of critical importance,'' Medvedev said, adding that relations are going through a difficult period.

Medvedev said before the election that he was prepared to work with any new leader in Washington, though he expressed a veiled preference for Obama: ``It would be easier to work with people with a modern outlook, rather than those whose eyes are turned back to the past,'' he said. He congratulated Obama on his election victory by telegram, the Kremlin said.

Financial Crisis

The Russian leader renewed his criticism of the U.S. for the global financial crisis, saying that U.S. failure to coordinate its economic policy with other countries allowed a ``local'' crisis to cause ``a fall on the markets of the whole planet.'' He also said the U.S. provoked the war between Russia and Georgia in August, a position he had voiced before.

Medvedev chose the day when global attention was focused on the U.S. to announce a number of sweeping changes in domestic policy, including the extension of the Russian president's term in office to six years from four.

Russian presidents are now limited to two consecutive four- year terms. Putin, as president from 2000 until May of this year, strengthened the office by centralizing power. He became Medvedev's prime minister, and will be eligible to run in the next presidential contest.

Term Extension

``Increasing the term is timely,'' Finance Minister Alexei Kudrin told reporters after Medvedev's speech in Moscow today. ``It will allow the economy to work in a more stable manner. Six years is a good term.''

Medvedev said members of the State Duma, the lower house of parliament, should have their terms extended to five years from four, and that the government should report to parliament on an annual basis.

On the global financial crisis, Medvedev said the U.S., the European Union and the so-called BRIC countries -- Brazil, Russia, India and China -- must work together to create an economic system that will be ``more fair and more secure.'' He added that ``we must radically reform the political and economic systems. Russia, at all events, will insist on this.''

Medvedev travels to Washington on Nov. 15 for a summit on the financial crisis. Presidential spokeswoman Natalya Timakova said last week that no decision had been made on whether Medvedev would meet the new president during his visit.

`Barbaric Aggression'

His calls for a new global order come after the worst month for Russian investors in a decade. The 50-stock RTS Index dropped 36 percent in October, the biggest monthly decline since the government devalued the ruble and defaulted on domestic debt in 1998. Investors have withdrawn about $140 billion from Russia in the last three months, according to BNP Paribas SA.

Medvedev began his address in the Kremlin by blaming the U.S. for Russia's five-day war with Georgia in August, which followed attempts by President Mikheil Saakashvili to take by force the breakaway region of South Ossetia.

``The barbaric aggression against South Ossetia'' was encouraged by the U.S. and Russia's military response was used by NATO as an excuse to send warships to the Black Sea, Medvedev said