Russian President Vladimir Putin on Tuesday met the prime minister of Bangladesh for talks that included the signature of a $1 billion arms contract, the Asian nation's biggest since its 1971 independence.

Bangladesh has recently been expanding its defence capabilities, building a new air base close to neighbouring Myanmar and adding frigates to its navy.

"Our countries intend to expand their military and technological cooperation," news agencies quoted Putin as telling Bangladeshi Prime Minister Sheikh Hasina during a Kremlin ceremony.

"Russia will extend Bangladesh a credit of $1 billion, which will be spent on the purchase on Russian weapons and military technology," the Russian leader said.

The arms purchase agreement included orders for armoured vehicles and infantry weapons, air defence systems and Mi-17 transport helicopters, a source close to Russia's state arms export agency told the Vedomosti business daily.

The source said the purchase did not include any tank orders because Bangladesh had earlier obtained those from China.

Bangladesh also opted out of its initial plans to purchase eight advanced Mig-29 fighter jets because of their $500 million price tag.

A separate part of the agreements saw Russia assign $500 million to finance the construction of Bangladesh's first nuclear power plant, to be built at a site called Rooppur.

The two planned Rooppur reactors are expected to cost $4 billion, with Russia also agreeing to continue financing construction after the first phase of the project is complete, news reports said.

Bangladesh's military spending spree follows the recent discovery of offshore natural gas deposits, which Russian officials believe means it will have no problems repaying the credit.

A.N.M Muniruzzaman, an analyst at the Dhaka-based Institute of Peace and Security Studies, told AFP it was the biggest defence deal ever to be signed by Bangladesh which gained independence in 1971.