SHANGHAI (AFP) - Prime Minister Dr Mahathir Mohamad told US President George W Bush today that international terrorism would not end until there was a resolution to the Middle East crisis.

During talks ahead of the start of a Pacific Rim summit in Shanghai, Mahathir and Bush said they agreed to differ on Malaysia's opposition to the US-led campaign against the Taliban rulers of Afghanistan.

"I explained to him the need to remove the causes of terrorism and I singled out the problem in Palestine as the most important cause," Mahathir told reporters.

Bush said he respected Mahathir's position on the Afghan campaign, which was launched by the US in retaliation for the Sept 11 atrocities in New York and Washington.

"He is concerned about the death of innocent people in Afghanistan and I assured him I am too," Bush said after talks with Japanese Prime Minister Junichiro Koizumi.

"I assured him (Mahathir) that... we were trying to be as careful as we possibly could to achieve our military objective," said the US leader, who is seeking to bolster support for his anti-terrorism campaign at this weekend's Asia-Pacific Economic Cooperation (Apec) summit.

Bush met yesterday with Chinese President Jiang Zemin and was to meet with Russian President Vladimir Putin tomorrow on the sidelines of Apec, which includes Muslim-majority nations Malaysia, Indonesia and Brunei.

"Our beef is not with the Afghan people. Our beef is with a government that houses and feeds and tries to hide terrorists," Bush said.

The Apec leaders are expected to issue a declaration condemning terrorism tomorrow.

Frustration and anger

According to Mahathir, Bush also urged an end to the Middle East conflict and expressed his support for Palestinian aspirations for statehood during their talks.

"The problem, of course, was that every time they try to get people together, somebody goes and spikes the whole thing by assassinating, killing somebody or exploding bombs and things like that," Mahathir said.

"We don't think this can be resolved overnight, but the solution of that problem, I pointed out, would resolve the feeling of frustration and anger in the Muslim world."

Mahathir said Bush believed Malaysia has "a role to play in the Islamic world".

The prime minister also said his differences with Bush should not prevent them co-operating in the broader war on terrorism, and also on economic issues.

"He accepted the fact that we may differ on certain positions but we see eye to eye on this very important issue of terrorism, and also the need to revive the world's economies because we feel that countries cannot develop unless world trade is restored."

Turning point

The two leaders also discussed the current wave of anthrax scares but Bush "didn't blame Malaysia, didn't link it to Malaysia at all", said Mahathir. The government has denied reports that one anthrax-laden letter sent to the US originated in Malaysia.

It was the first meeting between the two leaders since Bush came to office in January, and could mark a turning point in US-Malaysia ties strained since late 1998 when former vice president Al Gore voiced support for pro-reform street protests in Malaysia during an Apec meeting in Kuala Lumpur.

"He (Bush) wants bilateral relations to be strengthened and that is something that we also want to do. He promised it would be strengthened," Mahathir said.