In their first face-to-face talks, Obama and Medvedev also upped pressure on Iran over its nuclear programme and agreed the US leader would go to Moscow in July for a high-stakes summit as he stamps his imprint on US foreign policy.

Obama said he hoped that the talks at the US ambassador's residence in London on the eve of the G20 summit, marked "the beginning of "new progress in US-Russian relations" and said Mevedev's leadership had been crucial.

"I have agreed to visit Moscow in July, which we both agreed was a better time than January to visit," he said, in a quip about Russia's brutal winters.

Medvedev said he agreed with Obama that relations between the former Cold War foes had been adrift in recent years.

"They were drifting, and drifting in some wrong directions. They were degrading, to some extent," he said, referring to spats over missile defence, NATO expansion and Russia's war in Georgia.

"After this meeting I look at the future of our relations with optimism," Medvedev said.

Specifically, Obama and Medvedev agreed to hold talks to agree slashing cuts in their nuclear arsenals in a replacement for the cornerstone START arms reduction treaty which expires at the end of the year.

The 1991 treaty limits the number of missiles and warheads that each side may have, and was the basis of Cold War strategic arms control.

US officials did not disclose the size of the cuts, but signalled they would cover a substantial chunk of the superpower armoury.

Members of both delegations were almost euphoric in their reaction to the meetings. "This was not a meet and greet, this was setting a very ambitious agenda for US-Russian relations," said a senior US official.

"I guess Medvedev has seized the moment too," he added, speaking on condition of anonymity.

Another US official said the nuclear negotiating instructions were a "very significant breakthrough."

Russian first deputy prime minister Igor Shuvalov said the meeting was "not rosey, but positive."

Konstantin Kosachyov, head of the international relations committee of the Russian state duma added: "I believe the two leaders got a sense of one another as people."

However, both sides said there were areas of candid disagreement, including over Georgia, Russia's claims to have a sphere of influence in former Soviet states, and human rights.

Obama himself admitted in an earlier press conference with British Prime Minister Gordon Brown that despite areas of possible progress, areas of conflict remained.

"There are very real differences between the United States and Russia, and I have no interest in papering those over," Obama said.

The presidents also broached another area of tension, the proposed US missile defense scheme in Europe, which Russia opposes and the Obama administration has signaled it may slow to ease Moscow's fears.

Their statement said they discussed "new possibilities for mutual international cooperation" on the issue.

Washington has been keen to secure more robust Russian support in the diplomatic effort to convince Iran to halt its nuclear programme.

The leaders recognised Iran had a right to a "civilian nuclear programme" but added Tehran must do more to convince the world of the initiative's "exclusively peaceful nature."

"We call on Iran to fully implement the relevant UN Security Council and the IAEA Board of Governors resolutions including provision of required cooperation with the IAEA (International Atomic Energy Agency).

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