Barack Obama, the US president, has signalled he will soon remove Cuba from the US list of state sponsors of terrorism, boosting hopes for improved ties as he prepares for what's billed as an historic encounter with Raul Castro, his Cuban counterpart.

Obama's attendance at Friday's Summit of the Americas in Panama comes amid a new diplomatic outreach to Cuba, which has not attended the regional conclave since 1994.

For the first time, the US did not object to Castro attending.

Hours before his arrival in Panama, Obama said the US State Department had finished its review of Cuba's presence on the list, a major stumbling block for efforts to mend US-Cuba ties.

Ben Cardin, a US senator and top Democrat on the Senate's foreign relations panel, confirmed that the agency had recommended removing Cuba from the list, all but ensuring action by the president within days.

The highly anticipated interaction with Castro will test the power of personal diplomacy as the two leaders attempt to move past the issues that have interfered with their attempt to relaunch diplomatic relations.

The US has long since stopped accusing Cuba of supporting terrorism, and Obama has hinted at his willingness to take Cuba off the list ever since he and Castro announced a thaw in relations in December.

Yet Obama has stopped short of the formal decision amid indications that the White House was reluctant to grant Cuba's request until other issues, such as restrictions on US diplomats in Havana, were resolved.

Cuba is one of just four countries still on the US list of countries accused of repeatedly supporting global terrorism. The others are Iran, Sudan and Syria.

"Victim of US aggression"

However, Latin American policy analyst Juan Carlos Hidalgo told Al Jazeera that negoations between the US and Cuba had been held in secret "so we don't know what's going to happen".

"It's been a riling point for Cuba for over half a century, and it has been presenting itself as a victim of US aggression but now, all of a sudden the US wants to be friends with you (Cuba)," Hidalgo said.

"If you look at statements from Castro over the past months, it looks like he is trying to raise the price tag by asking the US to return Guantanamo Bay or lift the sanctions in return for closer ties."

In January, Castro said that Cuba would not improve relations with the US unless it returned the controversial naval base and military prison to Cuba and lifted the five decades-old sanctions.

Al Jazeera's diplomatic editor James Bays, reporting from Panama, said this year's summit was historic because all of the countries in the Americas were present for the first time.

"The Summit of the Americas is held every two years and in some ways this year's is a coming of age," Bays said.

"A lot of attention will be on the relationship on those two countries."

Bays said a cloud on the horizon at the summit was Obama's issuing an executive order for sanctions against Venezuelan officials a month ago.

Bays said the order could be viewed by some countries as "a clumsy move".

Venezuela extends hand

Al Jazeera's Lucia Newman, reporting from Panama, said despite frosty relations between the US and Venezuela, which at one point seemed would prevent a final declaration at the summit, there seemed to be some signs of a rapproachment.

"President Obama's statement that Venezuela represented a security risk to the United States gave President Nicolas Maduro fresh ammunition with which to claim that the Washington was plotting to overthrow him...Now, President Maduro seems to be  extending an olive branch, saying he wants better relations with the White House."

Maduro's comments followed a comments by a US official who said Venezuela did not represent a risk to the US, Newman added.

Diplomats hope the clarification would "leave the door open" to a final statement.

Source: Al Jazeera and agencies