STOCKHOLM: Norway's prime minister said on Wednesday its rift with China had not healed since the row over the 2010 award of the Nobel Peace Prize to a jailed Chinese dissident, and Oslo had made no decision over whether Beijing could join the Arctic Council.

Relations between the two nations have been frozen since the Norwegian Nobel Committee awarded Liu Xiaobo the 2010 Peace Prize for his non-violent human rights struggle.

"The ties are not becoming normal, they still reflect the problems, challenges we faced after the award of the Nobel Peace Prize in 2010," Prime Minister Jens Stoltenberg told Reuters during a summit of Nordic and Baltic leaders in Stockholm.

"It's very static, it's very, very much the same as it has been for a long time."

A call by Norway in October to normalise ties was rejected by China, which said the Nobel decision had constituted interference in its internal affairs.

Norwegian media has said that Norway may try and pressure China by threatening to stop it from joining the Arctic Council as a permanent observer.

The council is an influential forum for dialogue over how to develop and protect the Arctic region. Membership would help China wield influential over what may become important trade routes as the region's ice melts.

China has shelved bilateral free-trade talks with Norway and cancelled or avoided meetings with Norwegian ministers since the award to Liu.

Although bilateral trade as a whole rose over 20 percent in 2011, some firms, including several major players suffered a backlash.

Exports to China by Norwegian salmon producers like Marine Harvest have plunged due to protracted inspections at China's border. Norway's Statoil has linked lack of access to Chinese shale gas fields to Liu's award.

EUROPE

Stoltenberg said that while there had been signs of improvement in the European debt crisis, there were many years of problems ahead.

"There are some signs that some elements are moving in the right direction," Stoltenberg said.

The government has warned that a recession in the rest of Europe could still harm Norwegian exporters. But made a safe haven for global capital by its oil-driven prosperity, Norway is struggling to contain an overheating housing market and borrowing this year is expected to grow twice as fast as wages.

"There have been reduced interest rates in Italy and Spain and we have seen liquidity by the European Central Bank before Christmas has helped the financial sector."

"We have to admit ... that many countries in Europe have moved into something that looks like some kind of economic trap. It is a difficult situation to be in and will take time to solve those fundamental problems."

On sanctions with Iran, Stoltenberg said they must continue despite worries they were impacting the daily lives of Iranians.

"Sanctions are always difficult ... There is always a danger they will affect daily life of ordinary people.

"But on the other hand ... not to have sanctions and just sit and watch Iran developing their nuclear programme would be even worse."