PRAGUE, Czech Republic (AFP) US President Barack Obama and Russian leader Dmitry Medvedev signed a landmark treaty yesterday committing to major nuclear arms cuts, while also warning Iran to expect sanctions over its nuclear drive.

The two presidents hailed the new Strategic Arms Reduction Treaty (START) as opening a new era in ties, though the Kremlin said a missile defence shield that the United States wants in Europe could derail the agreement.

The former Cold War foes will be allowed a maximum of 1,550 deployed warheads, about 30 per cent lower than a limit set in 2002.

They are also restricted to 700 air-, ground- and submarine-launched intercontinental ballistic missiles that carry warheads.

Agreed after months of hard bargaining, the two presidents sat side-by-side in the Renaissance-era Spanish Hall at Prague Castle to sign the successor to the 1991 START treaty.

Obama called it "an extraordinary event" and an "important milestone" for anti-proliferation efforts and for often-strained US-Russia relations.

He said stopping the spread of nuclear weapons "will move us further beyond the Cold War, strengthen the global non-proliferation regime, and make the United States, and the world, safer and more secure."

Medvedev said the treaty "enables us to rise to a higher level of co-operation between Russia and the United States" while also declaring that the negotiations "have not been simple".

UN chief Ban Ki-moon called the treaty an "important milestone", while France, the world's third nuclear power, hailed the deal.

It was in the Czech capital a year ago that Obama gave a keynote speech committing the United States to the aim of a world without nuclear weapons.

The treaty was signed in a key year for anti-proliferation efforts with the international community struggling to persuade North Korea to disarm and to counter Iran's nuclear drive.

The two presidents warned Iran to expect sanctions if it maintains its refusal to halt uranium enrichment and co-operate with UN atomic watchdog inspectors amid Western suspicions that it is seeking a bomb.

Obama called for "smart" and "strong" sanctions by the United Nations, which in May will hold a review conference on the nuclear Non-Proliferation Treaty (NPT).

Medvedev said: "Unfortunately, Tehran is not reacting to an array of constructive compromise proposals. We cannot close our eyes to this."

"I have said many times that sanctions very often do not work, but sometimes they are necessary... These need to be smart sanctions, capable of prompting the right behaviour," Medvedev said.

Obama this week announced a new US nuclear posture under which the United States would not stage an atomic attack against a country that does not have nuclear weapons. He pointedly said, however, that this would not include Iran or North Korea.

The US leader is to host a nuclear security summit in Washington next week, ahead of the NPT review in New York in May.

The new START treaty has to be passed by the Russian parliament and the US Senate, where Obama's Democrats do not have the required two-thirds majority.

Top Democratic allies of Obama called yesterday for quick Senate ratification, with Senator John Kerry saying that the treaty was "too important to delay".

With November mid-term elections on the horizon and a bitterly partisan climate in Washington, prospects for passing the pact early next month as Obama wants are unclear, and Republicans have signalled strong concerns over the new accord.

Analysts have also highlighted how both the United States and Russia have thousands of nuclear weapons that are not officially deployed and do not come within the treaty.

The negotiations became bogged down over the US missile defence shield plan that Russia opposes. Obama said the two sides had agreed to a "deeper dialogue" on the defence shield.