HEILIGENDAMM, Germany (CNN) -- U.S. President George W. Bush and Russian President Vladimir Putin agreed Thursday to cooperate on missile-defense systems, cooling tensions between the two leaders at the G8 summit in Germany.
They had met one-on-one privately during the summit of leaders of the world's richest nations, being held in the resort of Heiligendamm on northern Germany's Baltic coast.
"We have an understanding about common threats, but we have differences. The difference is the ways and means in which we can overcome these threats," Putin said after meeting with Bush.
"It's much better to work together than to create tensions," Bush said. "He expressed his concerns to me. He is concerned that the missile-defense system is not an act that a friend would do."
Earlier Putin told Bush that Moscow would drop its objections to a planned missile-defense shield if the radar-based system was based in Azerbaijan instead of the Czech Republic and Poland, as Washington has proposed.
Putin's proposal to drop objections if the system were set up in Azerbaijan was a welcome surprise, as Moscow's rhetoric condemning the shield and the relationship between Russia and the United States were beginning to be reminiscent of the Cold War era.
Bush had previously said the plan was meant to block possible attacks from Iran and other nations, but Putin was concerned the systems would be on Russia's doorstep -- in Poland and the Czech Republic -- and could be converted into offensive weapons.
Last weekend, Putin warned that his country could aim nuclear weapons at European targets unless Washington abandoned its proposal. Both men have tried to calm the rhetoric since then.
"They're not a military threat. They're not what we should be hyperventilating about. What we ought to be doing is figuring out ways to work together," Bush told reporters following his last meeting with Tony Blair before he steps down as British prime minister later this month. (Chemistry on show)
Putin said he had suggested using an existing radar station in neighboring Azerbaijan, which covers all of Europe.
"The existing agreement makes it possible for us to do this. And the president of Azerbaijan stressed he would be glad to contribute to world security and stability," Putin said. He said he met with the Azerbaijan president on Wednesday.