- - Monday, May 26, 2014

BERLIN — The image triggered surprise and dismay in Berlin: Former German leader Gerhard Schroeder celebrating his 70th birthday last month in St. Petersburg with his good friend, Russian President Vladimir Putin, during the worst East-West standoff since the Cold War.

The German government was quick to distance itself from its former chancellor.

But as the West struggles to forge a united policy on Russia, the incident highlights the deeper, more complex relationship the two countries share and reveals why Europe’s most powerful nation is hesitant to step up pressure on Moscow over its adventures in Ukraine.


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“This crisis does put a lot of countries who do have close political, economic and historic ties with Russia in a difficult position,” said Raoul Ruparel, head of economic research at the London-based think tank Open Europe. “And a lot of countries appreciate the difficult position Germany’s in.”

That position is shaped largely by deep-rooted economic bonds. The two countries are close trading partners and vital markets for each other: Russia buys expensive BMWs and Audis, among other goods, and Germany is Russia’s biggest European investor — with German companies pouring in $22 billion last year.

Bilateral trade totaled $104 billion last year, down by 5 percent from 2012 but enough to make Russia Germany’s 11th-biggest trading partner.

While the developments in Ukraine have threatened to upend years of diplomacy, it’s business as usual for Germany’s mighty industry — the backbone of the European Union’s strongest economy.

Siemens AG CEO Joe Kaeser met with Mr. Putin in late March to discuss the engineering and electronics corporation’s business there. Industrial lobbying groups continue to mount pressure on Berlin to soften sanctions against Moscow.

Last week, the Russian-German Chamber of Foreign Trade sent a confidential paper to the government warning of lasting damage if tougher measures are applied, Reuters news agency reported.

When Germany’s industry talks, the government listens, analysts say.

“There’s a strong influence from the business side, and politicians react to what business wants,” said Claudia Kemfert, an energy researcher at the German Institute for Economic Research.

The energy connection is the most obvious link, with more than 35 percent of Germany’s gas and oil coming from Russian pipelines. Germany has become an important supplier even to the rest of Europe, shipping Russian gas to its neighbors to the east and west.

Then there are the strong ties to Gazprom, Russia’s state-owned energy giant and a pawn in the Ukraine crisis.

“[In Germany], Gazprom controls the whole chain, from the exploration, transportation, delivery to the German customers and storage — big parts of it,” said Ms. Kemfert. “That’s quite unique in Europe.”

Gazprom’s presence here is growing too. Wintershall Holding GmbH, a subsidiary of German chemicals giant BASF SE, sold a massive gas storage facility in the north of the country to Gazprom in an asset swap at the end of last year. Wintershall announced that it will complete the transaction despite political tensions.

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