TOKYO, February 27 (RIA Novosti) - Russia's prime minister urged Japan Tuesday not to allow a long-standing territorial dispute block bilateral trade or hinder economic relations.

Russia and Japan have contested the ownership of the Kuril Islands for over 60 years. Japan maintains that their seizure by the Soviet Union at the end of World War II was illegal, and the dispute has kept the two countries from signing a formal peace treaty.

"This [territorial] issue must not be a source of contention," Mikhail Fradkov said, speaking on trade and economic prospects.

Fradkov is leading a delegation that arrived in Tokyo Tuesday on a two-day official visit to determine new ways of developing and enhancing trade, economic, scientific and technical cooperation between Russia and Japan.

Fradkov said that Japanese public opinion has made trade and economic relations contingent on the resolution of the territorial dispute

He said the dispute could be settled by working diligently, but that any solution would take time.

"A solution must develop as we advance to new levels of cooperation, primarily in trade and economic relations," Fradkov said.

In the Treaty of San Francisco signed by Japan and the Allied Powers in 1951, which formally ended WWII, Japan renounced its rights to the Kuril Islands and Sakhalin. However, the four southern Kuril Islands were not specifically mentioned in the treaty, which was not signed by the Soviet Union.

Last year, Russia offered to return to Japan the Shikotan and Khabomai islands, with a combined area of just 276 square kilometers (172 square miles), or 6% of the disputed territory, on the condition that Tokyo renounce its claims to the two larger islands, Iturup and Kunashir, whose combined area totals 4,629 square kilometers (2,890 square miles).

Japan rejected the proposal, claiming its right to all four islands.