Efforts to reduce tensions in the Baltic Sea region took centre stage Friday when Russian President Vladimir Putin visited neighbouring Finland for talks with his Finnish counterpart.

The one-day working visit is Putin's first to Finland since Russia's annexation of Ukraine's Crimean peninsula in 2014. The takeover, along with Moscow's alleged support of separatists in eastern Ukraine, has strained ties with the West and triggered sanctions.

Russia has in recent years stepped up its military flights and other activity in the Baltic Sea region, and contributed to a debate in both Finland and Sweden whether they should consider applying for NATO membership.

Asked how Russia would react if Finland were to apply to join the military alliance, Putin said: "It is up to the Finns, how they want to defend their country."

He noted that Russia has agreed to keep its troops 1,500 kilometres from the Finnish border. "If Finland decides to join NATO, what would you think that Russia will do?" he said.

The increased activity has resulted in reports of close encounters between military jets and civilian planes.

President Sauli Niinisto said he had proposed to Putin that all military planes flying in the Baltic Sea region should have their transponders activated, making them visible to civilian radar.

Niinisto said the measure could help "build up trust."

Putin said that not only Russian planes fly without transponders, noting that NATO planes also do so and "according to statistics, they do it twice as much as our planes."

"But I agree with the Finnish president's suggestion and will raise the matter in the next Russia-NATO Council meeting," he told reporters.

Putin said the council was likely to meet after next week's NATO summit in Poland. Niinisto is due to attend.

Finland, like its neighbour Sweden, has since 1994 cooperated with NATO within the Partnership for Peace (PFP) framework and participated in NATO-led operations in Afghanistan.

Earlier on Friday the EU extended sanctions over Russia's annexation of Ukraine's Crimean peninsula for another six months. Moscow has denied charges that it is fuelling the conflict with supplies for the separatists.

Niinisto said that Finland had decided on the sanctions together with other countries.

"All parties must implement the Minsk agreement," Niinisto said, referring to a peace deal for eastern Ukraine.

Friday's meeting was held at the Finnish president's summer residence in Naantali on the south-western coast of Finland.

The EU sanctions that were extended until January 31, 2017, target financial, energy and defence areas, as well as goods that can be used for both civilian and military purposes.

The Russian Foreign Ministry said the decision was "short-sighted" and would not change Moscow's foreign policy, state news agency TASS reported.

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