By David Shukman BBC World Affairs correspondent

It always used to be said that Nato was created to keep "the Russians out, the Americans in and the Germans down".

Now, as the alliance considers some momentous steps that will shape its future, that old formula could hardly be more wrong.

Instead Nato finds itself bending over backwards to make the Russians feel more involved while at the same time doing all it can to keep the Americans and Europeans in harmony after 11 September.

No-one worries any more about Germany.

The next big move will come in Reykjavik, the capital of Iceland.

Alliance foreign ministers - 19 of them - are gathering there on Tuesday, among them the US Secretary of State Colin Powell and UK Foreign Secretary Jack Straw.

Warsaw Pact

It is ironic that this meeting - located purely on the basis of a rotation among member states - should be focusing on Nato's expansion.

Though close to the Arctic Circle, the talk around the conference table will be on the lands stretching far to the east.

On the agenda is how the alliance should cope with its planned admission of as many as seven new members later this year. The first issue is how to placate the Russians.

They have been watching with nervousness as Nato absorbs more and more former members of Moscow's old Warsaw Pact. Now they face the incorporation of former Soviet territories - the three Baltic states, Latvia, Lithuania and Estonia.

Russia will not have the power of veto

So, in a spirit of co-operation with President Putin - especially after his help in the fight against terrorism - the alliance is preparing to bring Russia much closer into the Nato fold.

A new Nato-Russia Council is being planned. The details should be settled in the next week.

The Russians would be included in a regular series of meetings on hot topics of common interest - like sharing intelligence on terrorist networks and the spread of nuclear and other weapons of mass destruction.

It is a long way short of membership - and, crucially, Russia will not have the power of veto.

But the aim is to sweeten the pill of other countries joining. That in itself is causing a few headaches.

'Export stability'

Although there is no decision yet on which countries will be admitted - that will come at a special summit in Prague in November - the Americans are thought to favour including a couple of candidates that others regard with disdain.

Romania and Bulgaria have worked hard to prepare themselves for membership.

And the Washington view is that including them would help "export stability" to an unstable part of the world.

Critics worry that the opposite could happen - that Nato will instead be "importing instability" and damage the one security organisation that has kept Europe peaceful for the past half-century.

In any event, the Nato Secretary-General Lord Robertson wants ministers to start thinking about how to manage a bigger alliance, whoever gets in.

The US is worried about the technology gap

At the moment, each meeting begins with a short statement from each representative. With 19 members now, that already takes ages. With 25 or so in the future, meetings could easily become unmanageable.

But the Americans have another priority.

They see their military forces leaping way ahead of the Europeans in strength and technology. The US ambassador to Nato talks of a "worrisome gap".

The question is, if the European members cannot field state-of-the-art special forces, transport planes, intelligence-gathering and weaponry then how can America co-operate with them?

In part it comes down to money and the size of defence budgets.

The Pentagon's recent increase in spending dwarfs anything on the eastern side of the Atlantic - and big increases in Europe are hardly likely.