Russian President Vladimir Putin, right, greets Turkish President Recep Tayyip Erdogan at the G-20 Summit in Osaka, Japan on June 29, 2019.

Turkey said on Saturday there was no setback in its plan to buy Russian S-400 missile defense systems, despite U.S. opposition, and President Donald Trump expressed understanding for the decision but did not rule out sanctions in response.

NATO allies Turkey and the United States have been at odds over Turkey's decision to procure the S-400s, with the United States warning of sanctions if the deal goes through.

Turkey has dismissed the warnings and said it would not back down, as already strained ties between the two countries have deteriorated further over the dispute.

Speaking before talks with Russian President Vladimir Putin on the sidelines of a G-20 summit in Japan, Turkish President Tayyip Erdogan said the deal for the S-400s showed improving ties between Turkey and Russia.

"Now, I believe eyes are on the delivery process of this issue, but there are no setbacks in our agreement," Erdogan said, adding that it was a priority for Turkey that the deal includes joint production of the systems and a technology transfer.

Erdogan also said it was important for Turkey to finish the first reactor in the Akkuyu nuclear power plant, its first nuclear plant, by 2023. He said non-nuclear equipment at the plant should be procured from Turkey.

The plant is being built by Russia's Rosatom at a cost of more than $20 billion.

Buying military equipment from Russia leaves Turkey vulnerable to U.S. retribution under a 2017 law known as the Countering America's Adversaries Through Sanctions Act (CAATSA).

The United States says the S-400s are not compatible with NATO's defense network and could compromise its Lockheed Martin F-35 stealth fighter jets, an aircraft Turkey is helping to build and planning to buy.

In an effort to sway Turkey, the United States has offered to supply it with its Raytheon Patriot missiles, but Erdogan has said the U.S. offer was not as good as Russia's S-400 proposal.

Under the possible U.S. sanctions, Turkey could face expulsion from the F-35 program among other measures that could deal a significant blow to Turkey's ailing economy and its defense industry sector.

Even minor U.S. sanctions could prompt another sharp sell-off in the Turkish lira. A 30% slide in the currency drove the economy into recession last year.

The lira has fallen another 10 percent this year, and markets remain on edge.