Russian President Vladimir Putin and Japanese Prime Minister Junichiro Koizumi agreed Monday to expand economic ties between their two countries while seeking ways to break a deadlock over a six-decade-old territorial feud.

The row over four islands in the Pacific, known as the Northern Territories in Japan and the Southern Kuriles in Russia, has prevented Moscow and Tokyo from signing a peace treaty after World War II.

With no quick solution in sight, however, both leaders were keen to use the symbolism of this year's 150th anniversary of trade relations to boost trade between Japan, Asia's No 1 economy, and Russia, the world's No 2 oil exporter.

"On the Northern Territories, there are differences of opinions and gaps. But we've agreed to overcome these gaps and seek a solution to this important issue in the context of expanding Japan-Russia co-operation," Koizumi told a joint news conference after the two leaders met.

Putin said the lack of a peace treaty hampered trade and investment but added: "I agree with my colleague (Koizumi) that we will do everything to solve this problem.

"That's why I have come here."

The two leaders also agreed to start ministerial talks on security issues, Koizumi said after they signed a packet of accords including one on counter-terrorism and another on Japan's support for Moscow's entry into the World Trade Organization.

Oil pipeline

Earlier in the day, Putin urged Japanese investors to put more money into Russia's economy and said better economic ties would help overall relations.

"Expanding the geography of our business relations will help us expand our ties in general," he told a gathering of some 500 Russian and Japanese business executives.

Russian firms like gas giant Gazprom and state oil company Rosneft attended the gathering, as well as Toyota Motor Corp and other Japanese firms that have spearheaded a wave of Japanese investment in Russia's growing economy.

Putin, seeking to assuage Japanese fears that China would benefit most from a planned oil pipeline from Siberia, also confirmed Moscow would build the pipeline to the Pacific coast.

"We plan to build the pipeline to the Pacific coast with eventual supplies to the Asia-Pacific region including Japan," Putin said in his speech at the investors' forum.

State pipeline monopoly Transneft is building the pipeline in two stages. It expects to finish the first stage at Skovorodino, far from the coast but close to China, in 2008.

Japan is keen to win a guarantee that Russia will carry on construction to a port in the Pacific, while China wants the pipeline to head south into its industrial north.

No date has been set for the second stage.

"The Pacific pipeline will be in both our interests," Koizumi said. "We agreed to work to reach an early agreement."

(China Daily November 22, 2005)