The Russo-Japanese War (1904–1905) was fought over rival ambitions in Manchuria and Korea. Most international observers expected Russia to win easily over upstart Japan—and were astonished when Japan sank the main Russian fleet and won the war, marking the first great Asian victory over a modern European power. Russia sought a warm-water port on the Pacific Ocean for its growing navy, and to expand maritime trade. Vladivostok was operational only during the summer, whereas Port Arthur, a naval base in Liaodong Province leased to Russia by China, was operational all year. Since the end of the First Sino-Japanese War in 1895, negotiations between Russia and Japan went nowhere. Japan was worried by Russia's long march east through Siberia and central Asia, and offered to recognize Russian dominance in Manchuria in exchange for recognition of Korea as being within the Japanese sphere of influence. Tokyo placed a much higher value on Korea than did St Petersburg, but Russia demanded Korea north of the 39th parallel to become a neutral buffer zone between Russia and Japan. While the Russian decision makers were confused, Japan worked to isolate them diplomatically, especially by signing the Anglo-Japanese Alliance in 1902, (even though it did not require Britain to enter a war.) After negotiations collapsed in 1904, the Japanese Navy opened hostilities by attacking the Russian Eastern Fleet at Port Arthur in a surprise attack. Russia suffered numerous defeats but Tsar Nicholas II was convinced that Russia would eventually win so he refused to settle. The decisive battle came in May 1905 at the Battle of Tsushima, when the main Russian battle fleet, after sailing around the world, finally arrived off Korea and was sunk in a matter of hours. Peace came with the Treaty of Portsmouth, mediated by American President Theodore Roosevelt. It was highly advantageous to Japan and transformed the balance of power in East Asia.