MOSCOW (AP) _ The defense and foreign ministries today denied a British newspaper report that Russia sold millions of dollars in arms to Serbia.

But an official in the Ministry for Foreign Economic Relations did not rule out the possibility that private firms might have been involved.

''Moscow responds with extreme bewilderment to The Observer report,'' the Russian Foreign Ministry said in a statement denying the Sunday newspaper story from London. ''This report does not correspond to reality.''

That report, which cited no sources, said Russia had agreed to supply $350 million in arms to Serbia and Serb fighters in Bosnia and Croatia.

It said generals from the Russian army and intelligence service signed the secret arms deal with Serb leaders Jan. 22 following negotiations in Romania and Bulgaria.

It said Serbs agreed to buy T-55 medium tanks, which are some of the oldest tanks in the Russian arsenal.

The Observer also said the sale involved anti-aircraft and anti-rocket missiles capable of destroying targets 375 miles away. When Russian Defense Ministry official Valery Novikov was read The Observer report, he ridiculed it, saying Russia has no anti-aircraft missiles with such a range.

The arms deliveries would violate a U.N. embargo.

Russians and Serbs are both Slavic peoples who share a common religion and many historic ties.

Russian Defense Ministry spokeswoman Yelena Agapova told The Associated Press: ''Our ministry has nothing to do with this.''

Anatoly Krasikov, a spokesman for President Boris Yeltsin, said he could neither confirm nor deny The Observer report.

Valery Kuzenko of the Oboronexport arms sales organization under the Ministry for Foreign Economic Relations told the AP that ''government-owned agencies could not have violated the U.N. embargo by supplying weapons to warring parties in the Yugoslav conflict.''

''Our ministry strictly complies with sanctions approved by the international community, even though they mean financial losses for Russia,'' he said.

Kuzenko did not rule out, however, that private firms associated with the Defense Ministry could have sold second-hand weapons in violation of the U.N. embargo.

''There are numerous private organizations, which manage in some ways to obtain export licenses from the government,'' he said without elaborating.

Russia has lost nealry $16 billion by implementing U.N. sanctions against Libya, Iraq and Yugoslavia, according to the Supreme Soviet legislature's committee for international affairs.