He commented on "an amazing transformation" that's taking place in Russia, such as eliminating its debt, growing its middle class and becoming a "significant international player" — all points sure to resonate with Putin and his pride in his country.

"Is it perfect in the eyes of Americans? Not necessarily. Is the change real? Absolutely," Bush said. "And it's in our interests, the U.S. interests, to have good solid relations with Russia and that's what Vladimir and I have worked hard to achieve."

Trying to portray a solid relationship, Hadley told reporters that the two nations have reached a civilian nuclear cooperation agreement to be signed Tuesday by Secretary of State Condoleezza Rice and Russian Foreign Minister Sergey Lavrov. The agreement assures countries that want peaceful nuclear power programs that they will have support of the international community as long as they don't contribute to nuclear weapons proliferation. Hadley said there also will be a document addressing the two nations' strategic nuclear forces after the expiration of the START I agreement in 2009.

Bush would not say whether or not the United States and Russia have agreed on tougher sanctions against Iran, saying only that the two countries stand together.

"When Russia and the United States speak along the same lines, it tends to have an effect and therefore I appreciate the Russians' attitude in the United Nations," Bush said. "We're close on recognizing that we got to work together to send a common message."

Putin predicted that "we will continue to be successful" as they work through the U.N. Security Council.

Security Council members have begun discussing a U.S. proposal for sanctions against Iran because of its refusal to stop enriching uranium. The U.S., Russia and their fellow permanent U.N. Security Council members, however, have told Iran they will hold off on new sanctions if it stops expanding its enrichment activities while they seek to restart talks about the program with Tehran. Diplomats say the Iranian government has not yet responded to the proposal.

Putin suggested there would be "further substantial intercourse on this issue."

It was unclear whether the leaders had agreed on methods or merely wanted to gloss over for public consumption any differences on strategy.

Earlier, Bush and the Russian leader began with a hearty breakfast of pancakes and omelets. Then they piled into a powerful speedboat navigated by Bush's father — former President George H.W. Bush.

Under a bright morning sunshine, Putin and the Bushes roamed close to the shoreline around the Bush family's oceanfront estate for about an hour and a half. Bush acknowledged that Putin was the only one who caught a fish, but Putin called it a "team effort."

Then the two presidents sat down for their informal talks inside Walker Point's stone-and-shingle main house overlooking the coastline.