Russian President Vladimir Putin has said he is open to striking a deal with Japanese Prime Minister Shinzo Abe on a territorial dispute but is against the trading of territories. Both the leaders will be discussing the islands, called the Southern Kurils by Russia and the Northern Territories by Japan.

The eight decade-long row over the islands is said to have prevented both the countries from signing a World War II peace treaty, which reportedly has remained as a key issue for them.

"We're not talking about some exchange or some sale. We are talking about finding a solution where neither of the parties would feel defeated or a loser," Putin said in an interview with Bloomberg on Thursday (1 September).

The two leaders are expected to meet on 2 September in Russia's Pacific port city of Vladivostok on the sidelines of an economic forum to discuss various issues, including reaching a settlement on the territorial spat and closer economic cooperation.

When asked if he was ready to "give up" one of the islets held by Moscow but claimed by Tokyo, the Russian president said: "We do not trade in territories."

He further said that If it "can reach a similarly high level of trust" with Japan as it now enjoys with China "then we can find some sort of compromise."

The dispute between the two countries began after Moscow's seizure of Hokkaido territory, which Japan calls it as its Northern Territories, while for Russia it is known as Southern Kurils. Russia is thought to have annexed the island in the final days of World War II. Since then both the countries have not signed a treaty that ratifies the end of the war. Japan had insisted that a peace treaty cannot be signed until the territorial dispute is resolved.

At the time when China has rattled nerves in Asia with military expansion and its assertive moves in the East and South China Seas are being hotly debated, Japan is reported to be hoping to win Russia's cooperation for deeper economic ties that is likely strengthen its relations in the face of rising china.

However, experts fear that even if Abe manages to lure Putin for a pact, it may not help in reaching a breakthrough on the dispute both the countries are engaged in over the small islands.

The Japanese prime minister has also reportedly created a ministerial portfolio in his cabinet to seek economic cooperation with Russia. It is said to be the only post to name a specific country.