US-Cuba relations
US President Barack Obama (L) and his Cuban counterpart Raul Castro shake hands as UN Secretary General Ban Ki-moon (R) looks on, before the inauguration of the VII Summit of the Americas in Panama City Handout/Reuters

US President Barack Obama and his Cuban counterpart Raul Castro shook hands at the Summit of the Americas in Panama in what is seen as a historic gesture between the two former cold war enemies.

The handshake sets the stage for an interaction between the two leaders on the sidelines of the conclave, which is expected to pave the way for diplomatic and trade ties between the US and Cuba which have had no formal relations for more than 50 years.

National Security Council spokesperson Bernadette Meehan said in a statement: "At the summit of the Americas this evening, President Obama and President Castro greeted each other and shook hands."

"This was an informal interaction and there was not a substantive conversation between the two leaders," a White House official told Reuters.

However, tensions between the US and Venezuela are threatening to overshadow the handshake at the summit, in which leaders of North, Central and South America are taking part.

Ahead of the talks, Obama said: "Not because it's imposed by us, the United States, but through the talent and ingenuity and aspiration and the conversation among Cubans, among all walks of life. So they can decide what is the best course of prosperity."

"As we move towards the process of normalisation, we'll have our differences government to government with Cuba on many issues. Just as we differ at times with other nations within the Americas, just as we differ with our closes allies."