Poland rejected as insufficient on Friday a U.S. offer to boost its air defences in return for basing a "missile shield" on its territory but said it remained open to further talks with Washington.
The decision by Poland, a staunchly pro-American NATO ally, is a setback for the Bush administration's plans for global missile defence, which is intended to counter possible threats from what Washington calls "rogue states", particularly Iran.
"We have not reached a satisfactory result on the issue of increasing the level of Polish security," Prime Minister Donald Tusk told a news conference after studying the final U.S. proposal.
"The aim of the negotiations, in my view, is to enhance the security of our country. We still agree that it is fundamental for us to maintain our alignment with the United States, which has been, is and will continue to be our strategic ally."
In Washington, a White House spokesman said the United States would continue its talks with Poland.
"Discussions will continue," Gordon Johndroe told Reuters in an e-mail message.
The details of the U.S. offer have not been made public, though Tusk said it included a proposal to site Patriot ground-to-air missiles on Polish soil for one year.
In the months-long negotiations, Tusk's centre-right government had sought billions of dollars worth of U.S. investment to upgrade Polish air defences in return for hosting 10 missile interceptors.
"We are ready to accept proposals or corrections from the American side which would include our proposal to increase (our) security. We can do this in a day, a week, a month," Tusk said.
The Czech Republic has agreed to host a tracking radar under the project. Its parliament has still to ratify the deal.
Russia has condemned the missile defence plan as a threat to its own security and has said it will target missiles at Poland and the Czech Republic - its communist-era satellite states - if the deployment goes ahead.
THREAT
"If the threat related to the shield indeed increases, then we need elements such as Patriots on Polish territory, and not just for one year," Tusk said, adding that the problem was not a question of money.
Political analysts said Tusk's rebuff to Washington demonstrated a new Polish self-confidence on the global stage. Warsaw is one of Washington's firmest allies in the region and has troops serving alongside its ally in Iraq and Afghanistan.
"This is the first time that Poland has said 'no' to the U.S. . It certainly sends a signal to Washington that Poland's support should not be taken for granted in any circumstances," said Pawel Swieboda, head of demosEuropa, a Warsaw think-tank.
"But it is also the case that the government greatly raised expectations and that these were never very realistic. Poland does need some compensation (for hosting the interceptors) but they went too far in demanding Patriots."
Polish President Lech Kaczynski, a right-wing opponent of the Tusk government and a strong supporter of the shield plan, is now likely to step up his attacks on the government.
But analysts said the domestic political fallout would be limited as Polish voters are largely hostile to the project.
Washington has said it wants Poland to host the interceptors but that it would look elsewhere if Warsaw declines to take part. The Baltic republic of Lithuania, northeast of Poland, has been mooted as an alternative site for the interceptors.
