"We have directed our governments to begin negotiations with the purpose of concluding an agreement between the United States and the Russian Federation on (nuclear) cooperation."

Russia's atomic energy chief Sergei Kiriyenko said the deal would include joint development of new nuclear technologies, including fourth-generation reactors.

It would also lift restrictions on Russian sales of uranium to the United States and enable Russia to take back and store Russian-produced spent fuel from reactors in the United States.

"I think this is a good idea," said David Albright, head of the Institute for Science and International Security (ISIS), a U.S.-based think-tank. "It's about time this happened."

He said it would require a greater degree of openness on Russia's part and would enable U.S. experts to get access to some sensitive nuclear facilities in Russia.

But he said the deal between the two states possessing most of the world's roughly 30,000 atom bombs would generate heated debate in the U.S. Congress because of what he said was Russia's undeserved reputation as the world's top proliferator.

The statement also pledged the creation of "a system of international centers to provide nuclear fuel services, including uranium enrichment, under IAEA (International Atomic Energy Agency) safeguards."

Putin told reporters the idea was to create a system giving all states access to nuclear power while guarding against proliferation of nuclear weapons.

The first center in eastern Siberia would be ready for operation under IAEA supervision next year, Kiriyenko said.

COMBATING NUCLEAR TERRORISM

At the same time as the nuclear deal was announced, Bush and Putin declared in a joint statement that they would step up efforts to combat nuclear terrorism, a threat it called "one of the most dangerous international security challenges we face."

It invited other countries to join the initiative and said participants would cooperate closely with the IAEA, the U.N.'s Vienna-based nuclear watchdog.

"Interacting closely with the IAEA, we will take steps to improve participants' capabilities to ensure accounting, control and physical protection of nuclear materials and radioactive substances, as well as security of nuclear facilities," it said.

They would also work to improve the ability of countries to "detect and suppress illicit trafficking" of nuclear materials.

Albright and several analysts from anti-nuclear lobby groups said this was likely an attempt to undercut the fierce attacks any Russia-U.S. deal will face when it reaches Congress.

"They know that the biggest argument against nuclear power is proliferation. It's almost as if they're trying to pre-empt that argument for why you shouldn't be doing this deal," said Alice Slater, president of the GRACE Policy Institute.

"Bush and Putin are about to turn Russia into the world's nuclear toilet," said Tobias Muenchmeyer, an analyst for environmental group Greenpeace.

Bush said it came up at their social dinner on Friday night.

"I talked about my desire to promote institutional change in parts of the world like Iraq, where there is a free press and free religion, and I told him that a lot of people in our country, you know, would hope that Russia would do the same thing," Bush said.

He quickly added: "I totally understand, however, that there will be a Russian-style democracy. I don't expect Russia to look like the United States. As Vladimir pointedly reminded me last night, 'We have a different history, different traditions."'

Putin pounced on the reference to Iraq. "We of course don't want to have a democracy like the one in Iraq, to be honest," he deadpanned, to laughter from Russian-speaking listeners.

Upon hearing the translation of Putin's remark, Bush interjected: "Just wait."

NEW LAW

Russian non-governmental organizations say their ability to operate free from state interference has been drastically curtailed by a Kremlin-sponsored law passed this year. Washington has joined criticism of the law.

Masha Lipman, editor of the Carnegie Moscow Center's Pro et Contra journal, wrote in The Washington Post Saturday that "the Russian government has resorted recently to police practices strongly reminiscent of those used some three decades ago in the Soviet Union."

Bush met a number of Russian rights campaigners on Friday and said he would relay their concerns about curbs on civil liberties to Putin.

"Look, he's willing to listen, but he also explains to me that he doesn't want anyone telling him how to run his government," Bush said on Saturday.

National Security Adviser Stephen Hadley said Bush several times mentioned to Putin his meeting with the rights campaigners, including one or two specific issues they raised.

Putin told the news conference: "Nobody knows better than us how to strengthen our own state. We know very well that we cannot strengthen it without developing democracy. And of course we will do this. We will do it independently."

Ahead of Bush's talks, the U.S. Senate unanimously adopted a resolution that called on Bush and other G8 countries "to let President Putin know that his attempts to turn back the clock on democracy are unacceptable."

Kiriyenko said the center would have to be put under the control of the International Atomic Energy Agency, and that Russian legislation would be amended accordingly.

Kiriyenko described the center in Angarsk as "the first step to be taken by Russia in this direction."

However, he said it did not imply Russia had given up its idea to set up a joint venture for enriching Iranian uranium on its soil, adding that the Angarsk center would provide Iran with opportunities to develop its civilian nuclear industry.

On the same day, visiting U.S. President George W. Bush and his Russian counterpart Vladimir Putin announced here on Saturday that they have agreed on a plan to prevent the spread of nuclear weapons by setting up international enrichment centers.

The two leaders unveiled that initiative at a join press conference after their talks.

"I have to say that the cabinet meeting tomorrow (Monday) is poised for many things," he said.

He was speaking after officials said militants from the separatist Kurdistan Workers' Party (PKK) killed seven soldiers and one member of the village guard, a government-paid Kurdish militia supporting the army, in a clash overnight in the countryside in Siirt province.

The army launched a security operation at dawn, bombing the area to which the militants fled and deploying reinforcement, including elite commando teams, the CNN-Turk news channel reported.

The incident came after five soldiers died Thursday in a landmine explosion blamed on the PKK on a rural road in Bitlis province.

In nearby Bingol, meanwhile, a PKK militant was killed after rebels ignored calls to surrender during a security operation, the Anatolia news agency reported Sunday, citing the local governor.

In Ankara, the higher board for anti-terror struggle, comprised of senior ministers, generals and security officials, reviewed the situation at an emergency meeting, in an apparent preparation for Monday's cabinet meeting.

The board, chaired by Foreign Minister Abdullah Gul, who is also a deputy prime minister, made no statement after the discussions.

The PKK, listed as terrorist group by Turkey, the European Union and the United States, has fought for Kurdish self-rule in the southeast since 1984 in a conflict that has claimed more than 37,000 lives.

Clashes in the region have been on the rise since 2004 when the PKK called off a five-year unilateral ceasefire.

Erdogan has repeatedly pledged to resolve the conflict with more democracy and prosperity for the Kurdish minority.

The government, however, rejects negotiating a settlement with the PKK and Erdogan said in April that he would also avoid dialogue with the main Kurdish political movement, the Democratic Society Party, until it openly denounces the PKK as a terrorist group.

At least 85 rebels and 49 members of the security forces have been killed this year in the southeast, according to an AFP count.

Kurdish militants have also claimed responsibility for 11 blasts in urban centres, in which nine people were killed and nearly 140 others injured.

In the spring, the army shifted thousands of troops to regions at the Iraqi border to stop what it described as increasing infiltration of PKK militants from safe havens in the mountains of neighbouring northern Iraq.

The rebels have found refuge in the Kurdish-controlled enclave since 1999 after they declared the unilateral truce.

Much to Ankara's frustration, both Baghdad and Washington have been reluctant to take military action against the PKK, arguing that their forces are swamped by violence in other parts in conflict-torn Iraq.

In late June, the parliament passed a new anti-terror law expanding the scope of crimes punishable as "terrorist" acts and introducing restrictions on the media for publications deemed as propaganda in favour of terrorist groups.

"This follows what happened yesterday in Gulf markets over all the concern about what is happening in the Middle East," said Samer Al Jaouni of Ahli Bank in Qatar.

Israel launched an assault on Lebanon five days ago after Lebanese Hizbollah guerrillas, backed by Iran and Syria, captured two Israeli soldiers and killed eight.

Hizbollah rocket attacks killed eight people in the Israeli city of Haifa on Sunday. Israel's assault has killed 107 people in Lebanon, a country that has drawn billions of dollars in Gulf Arab investment over the past few years.

The crisis has spooked investors in the world's biggest oil exporting region, where stock markets posted some of their biggest losses since a region-wide crash earlier this year.

"These declines are due to the Lebanese situation and to fears that this could spread throughout the region and involve Iran. But markets could stabilize if the conflict doesn't spread," said Joe Kawkabani of Shuaa Capital in Dubai.

"Second quarter results have been strong and the Qatari economy is doing well, but if Iran and Syria get involved in this conflict, the fear is that missiles could fly over the Gulf and that is worrying investors. Everyone is playing it safe right now," he said.

Instead, he said, it gave Iran's regime an excuse to crack down on dissidents, accusing them of colluding with the U.S. and promoting an invasion of the Islamic republic.

Ganji, 47, spoke with The Associated Press during a world tour to raise awareness of human rights violations in Iran. He joined protesters outside U.N. headquarters on a symbolic three-day hunger strike aimed at forcing the Iranian regime to release political prisoners.

Since his release, Ganji has toured Europe and collected the World Association of Newspapers' Gold Pen of Freedom award.

On Monday, he will collect an award for his fearless writing from the National Press Club in Washington.

Ganji said he plans to return to Iran, and expects to be jailed again, but is not afraid.

"My goal during my world tour is to show the world that there is an alternative, there is another voice in the region," he said. "That's the voice of peacefulness, liberty, human rights and a democratic Islam."

Ganji said that, until oil revenues are wrested from state hands, there will be virtually no democratic nations in the Middle East.

"Oil is the greatest factor that prevents democracy to take root in the region. Petroleum states have no need for their people," he said. "They do not depend on taxation and therefore there is no accountability to the people."

Ganji, who was imprisoned in 2000 after writing a series of articles accusing Intelligence Ministry agents of killing dissidents, said he was tortured repeatedly during six years in prison.