CNN

Bush and Putin met at the G8 summit Thursday.

ROSTOCK, Germany (CNN) - At a much-anticipated one-on-one meeting with President Bush at the G-8 Summit, Russian President Vladimir Putin tried to "de-escalate the tensions" between the two nations by offering a concrete proposal to end their heated standoff over U.S. plans to build a missile defense system in Eastern Europe, according to White House National Security Adviser Stephen Hadley.

"We think it was a positive development," Hadley said after the meeting.

Hadley told reporters Putin proposed the radar for the U.S. missile defense system be based in Azerbaijan, a former Soviet Republic located between Eastern Europe and Western Asia and to the south of Russia. Azerbaijan as an old Soviet-built radar system that is still operational and Putin would like to use this radar to detect threats and then send signals to U.S. interceptor missiles based elsewhere.

This would be an alternative to the U.S. proposal to base the radar in the Czech Republic, which Putin has balked at strongly, threatening on the eve of the summit to aim nuclear weapons at Europe if the U.S. did not drop the proposal.

Hadley said Mr. Bush called the Putin idea an "interesting proposal" that "needs to be studied by military in the weeks ahead. The two nations are now planning to start a "working group," according to Hadley, that would include cabinet secretaries and ministers from each side to work through the proposals.

"He has some ideas, we have some ideas," Hadley told reporters in a conference call. "The President's idea was, 'let's get some experts together in a very transparent way ... let's put all the options on the table."

The U.S. has repeatedly insisted that the missile defense shield would be used to defend Europe and potentially Russia against attacks from Iran and other rogue nations. But Putin has expressed deep concerns that the defensive missiles, which would be stored in Poland, could also be used as offensive weapons against Russia.

After Thursday's meeting, Hadley said Putin seemed to put some stock in U.S. arguments that the defense shield could actually help protect Russia against a rogue nation by indicating "he recognized there was a potential threat" against Moscow too.

 – CNN White House Correspondent Ed Henry