KHABAROVSK, Russia (Reuters) -- The leaders of the European Union and Russia are holding summit talks near the Chinese border, with deep rifts on energy supplies and trade overshadowing the meeting.
Russia and the EU say they want to improve ties after rows over gas supplies via Ukraine and last year's war with Georgia. But diplomats say discord is simmering just below the surface.
Russian President Dmitry Medvedev played down differences as he welcomed European leaders in Khabarovsk, a city nine time zones from Brussels.
"We need to come back to the financial and economic crisis, we need to talk about the state of affairs in the energy sector and a new security architecture," Medvedev said.
On the eve of the summit, the Kremlin cautioned there could be sparring over energy and trade while a Russian government source warned of another gas crisis with Ukraine.
Kremlin spokeswoman Natalya Timakova said the summit took place in a friendly atmosphere with both sides trying to avoid stumbling on sensitive points.
"It was a very good meeting," she told reporters. "The EU partners agreed to discuss Russian proposals on the European energy security, thus clearly agreeing that the existing system is not perfect," Timakova said.
Some EU members had hoped for a new start to relations after Vladimir Putin stepped down as Russian president last year, but growing lists of grievances remain on both sides.
Russia's gas dispute with Ukraine, which left some EU customers without gas in the dead of winter, raised concerns about Moscow's reliability as the supplier of a quarter of the 27-member bloc's gas needs.
Medvedev held formal talks on May 22 after an informal dinner with European Commission President Jose Manuel Barroso and Czech President Vaclav Klaus and a short boat ride down the Amur river on May 21.
Before the meeting, Medvedev told local students that Khabarovsk, a city 8,000 kilometers east of Brussels, was chosen as the venue to show EU leaders the vast size of Russia, the world's largest country.
"It was absolutely pleasant, it was social, it was interesting to bring us out here and for the first time we see European civilization in Khabarovsk, 30 kilometers from the Chinese border," European External Relations Commissioner Benita Ferraro-Waldner said.
She accepted that EU-Russian relations had been damaged by last year's Georgia war and the Ukraine gas dispute. "There was indeed a rough patch in our relations," she said, adding they were now on better terms.
Russia was angered this year when Brussels announced a deal with Ukraine to refurbish ageing Soviet-era pipelines, a move Moscow felt had been taken without due regard for its interests as the world's biggest gas supplier.
The Kremlin's chief foreign policy adviser, Sergei Prikhodko, again questioned the deal ahead of the summit and said that perhaps the EU should pay Ukraine's debts too.
Prikhodko also warned Russia was losing patience over its WTO bid after more than a decade of attempts to join the 153-member body. A bilateral meeting between trade officials on May 22 was one of the last items added to the agenda.