Moscow ? President Bush and Russian President Vladimir Putin signed a landmark nuclear arms reduction treaty in a gilded room of the Kremlin on Friday, and proclaimed it would help cement vastly improved relations between the former superpower rivals.

“Russia’s a friend and that’s the new thinking. That’s part of what’s being codified today,” Bush said after he and Putin put ink to a pact that slashes nuclear arsenals by two-thirds.

Putin said, “This is a serious move ahead to ensure international security.” Even so, the two nations struggled to close their divide over Russia’s continued nuclear assistance to Iran, with some progress reported.

The arms accord would limit the United States and Russia within 10 years to between 1,700 and 2,200 deployed strategic nuclear warheads, down from about 6,000 apiece now a two-thirds cut in their respective nuclear arsenals.

“Friends really don’t need weapons pointed at each other, we both understand that,” Bush said. “But it’s a realistic assessment of where we’ve been. Who knows what will happen 10 years from now? Who knows what future presidents will say and how they’ll react?”

Putin said there were legitimate reasons for keeping a smaller nuclear arms supply. “Out there, there are other states who possess nuclear arms,” he said. “There are countries that want to acquire weapons of mass destruction.”

Specifically, Bush expressed concern about Russia’s nuclear assistance to Iran. “We spoke very frankly and honestly about the need to make sure that a non-transparent government, run by radical clerics, doesn’t get their hands on weapons of mass destruction,” Bush said.

The United States has branded Iran as a sponsor of terror and part of an “axis of evil” alongside Iraq and North Korea.

But Putin gave little ground, defending the assistance as largely energy-related and pointing out that the United States has similarly helped North Korea to build a nuclear power plant. Besides, he said, much of Iran’s nuclear program is based on Western technology.

U.S. officials said Iran recently conducted a successful flight test of its Shahab-3 ballistic missile and intends to develop missiles that could reach targets in Europe.

Russia is helping build a nuclear reactor in Bushehr and scientists have contributed missile expertise to Iran. U.S. officials question Russia’s assertion that the Bushehr facility is simply a civilian reactor.

The U.S. assistance to North Korea was part of an agreement under which North Korea said it would abandon its own nuclear program in exchange for U.S. reactor technology.

Two senior administration officials, speaking on condition of anonymity, said the White House is willing to offer Russia economic and other incentives to cooperate on the Iran issue. They said that idea, which is in the early stages of development, coupled with Putin’s assurances that the technology is strictly energy-related could be the starting point of a plan to resolve the issue. Officials said they don’t expect immediate results.

Bush later raised the touchy issue of Chechnya, where Russian military operations continue, during a meeting with religious and community leaders at the U.S. ambassador’s residence.

“The experience in Afghanistan has taught us all that there are lessons to be learned about how to protect one’s homeland and, at the same time, be respectful on the battlefield,” he said.

Bush and Putin also talked to media and business executives, lunched at a palace at the Kremlin and took a walking tour of the sprawling grounds with their wives.

Putin and Bush also signed a “strategic framework” document laying out political and security challenges remaining between the two countries, including future cooperation on missile defense.

That was a concession to Putin, who had opposed the U.S. decision to bail out of the 1972 Anti-Ballistic Missile treaty to pursue such a system.

The presidents also issued a series of statements, agreeing to improve economic ties; work more aggressively for peace in the Middle East; allow more people-to-people contact; and cooperate closely on energy and counterterrorism.

Bush expressed sympathy with Russia’s long-standing efforts to win repeal of the 1974 Jackson-Vanik law, which denies normal trade to communist states that restrict emigration in Russia’s case, Jewish emigration resulting in far higher tariffs on the goods they produce.

Legislation to lift the restrictions is bogged down in Congress. “I hope they act,” Bush said. He praised Russia for improved treatment of its Jewish community.

Russia also wants the United States to declare it a “market economy” to help ease its entry into the World Trade Organization, the Geneva-based body that sets and polices international trade policy. WTO membership would make Russia a more predictable place for Western investment.

Bush used the term “market economy” in referring to Russia, and said it was in U.S. interests for Russia to join the WTO. But, during questioning, he said “it’s hard for me to predict a timetable” for that to happen.

Putin said Russia needs every obstacle lifted so that its economy could flourish. He joked that the United States could make airplanes cheaply if Russian steel could be imported without tariffs, a reference to stiff tariffs that Bush slapped on imported steel in March.

Bush and Putin signed the arms pact in the ornate, golden St. Andrews Hall at the Kremlin a site once targeted by U.S. intercontinental ballistic missiles. The three-page treaty represents the biggest-ever cut in strategic nuclear weapons, but it may be the last.

Bush administration officials said they did not intend to negotiate further arms control pacts with Russia, citing the end of the Cold War and a changing economic and military paradigm.

The treaty says both countries want to pursue a “path of new relations for a new century.” It states that each country shall determine for itself how to meet the reduction targets, and does not say whether removed warheads should be destroyed, as Russia wanted, or stored, the U.S. position.

That the agreement was even put on paper was a concession to Putin, who wanted formal language to be ratified by both the U.S. Senate and the Russian Duma. Bush originally called for a handshake agreement.

Ratification was expected in both countries.

The cuts in long-range nuclear weapons which can be mounted atop missiles or carried in submarines or bombers will still leave enough firepower to destroy major U.S. and Russian cities many times over. But it will bring arsenals down to about a tenth of what they were at the height of the Cold War.

Bush and Putin last November agreed to the levels, which are close to ones that former President Clinton and Russian President Boris Yeltsin outlined in 1997.

Russia was the second stop on Bush’s six-day, four-country tour of Europe. He also will travel to France and Italy. While in Russia, the President will also visit St. Petersburg, Putin’s hometown.

Bush began his first full day in Russia with a visit to the Tomb of the Unknown Soldier, just outside a Kremlin wall off Red Square.