US Vice President Dick Cheney has accused Russia of backsliding on democracy and using its vast energy resources to blackmail its neighbours.
Mr Cheney said Russia was restricting its citizens' human rights
He said Moscow had a choice to make between pursuing democratic reforms and reversing the gains of the past decade.
Mr Cheney's comments - one of the sharpest US rebukes to Russia in years - came at an eastern European regional summit in Lithuania's capital, Vilnius.
Russia rejected Mr Cheney's remarks as "completely incomprehensible".
"The speech of Mr Cheney in our opinion is full of a subjective evaluation of us and of the processes that are going on in Russia," said presidential deputy spokesman Dmitri Peskov, quoted by Reuters news agency.
Addressing the Vilnius conference, Mr Cheney said Russia had "nothing to fear and everything to gain from strong stable democracies on its borders".
He warned that opponents of reforms in Russia "were seeking to reverse the gains of the last decade" by restricting democratic rights.
"In many areas of civil society - from religion and the news media, to advocacy groups and political parties - the government has unfairly and improperly restricted the rights of the people," Mr Cheney said.
But he said "none of us believes that Russia is fated to become an enemy".
Mr Cheney also said that "other actions by the Russian government have been counter-productive, and could begin to affect relations with other countries.
"No legitimate interest is served when oil and gas become tools of intimidation or blackmail, either by supply manipulation, or attempts to monopolise transportation," he added.
Russia drew international criticism after briefly turning off its gas taps to Ukraine in January, in a row that disrupted supplies to Europe.
A number of Russian politician have said that the US policy of promoting democracy in the republics of the former Soviet Union is really a tool to establish Washington as the dominant power in the region.
In Vilnius, Mr Cheney also condemned the Belarussian government, describing it as a dictatorship which forced its people to live in a climate of fear.
The conference is discussing how Nato and the European Union can support democratic and security reforms as they continue to expand eastwards into Russia's historical sphere of influence.
The presidents of Ukraine, Georgia, Romania, Bulgaria, Estonia, Latvia, Lithuania and Poland are attending the conference, sharing their experience of building democracy since the collapse of the Soviet Union.
Georgia's President Mikhail Saakashvili accused Russian politicians of "imperial nostalgia".
"Political forces in Moscow actively work to undermine our economies, our sovereignty, and even our system of governance," he said.