U.S. President George W Bush has described as "interesting" a proposal by Russia's President for resolving the row over the planned U.S. missile defense shield.

Vladimir Putin said their two countries could use Gabala radar system in Azerbaijan to develop a shield covering all of Europe, during talks at the G8 summit.

Mr Putin said the base could detect incoming missiles from so-called rogue states aimed at Europe or the U.S.

Russia has been critical of U.S. plans to extend the shield into central Europe.

Mr Putin has repeatedly scoffed at U.S. claims the defense shield is targeting rogue states, and has said Moscow may in response aim its missiles at Europe.

But after the meeting on the fringes of the summit in Germany, the Russian leader said the threat to re-target Russian missiles could be withdrawn if Washington agreed to use the former Soviet radar base at Gabala in Azerbaijan. "This will make it possible for us not to change our stance on the targeting of our missiles," Mr Putin said. "On the contrary, this will create the necessary grounds for common work."

"This work should be multi-faceted with the engagement of the states concerned in Europe."

Mr Putin added that if Washington and Moscow co-operated transparently on missile defense, "then we will have no problems".

Mr Bush said his Russian counterpart had presented some interesting suggestions and that they would discuss the issue further during two days of talks beginning on 1 July in Kennebunkport, Maine.

"We both agreed to have a strategic dialogue," he said, BBC reports.