Germany, Russia talks: business

MUNICH: German Chancellor Angela Merkel is set host Russia's President Dmitry Medvedev for talks dominated by efforts to avoid a new spat over gas supplies to Europe and the global financial crisis.

The two leaders will hold private talks at a picturesque castle near the southern city of Munich before being joined by key members of both governments, including the ministers for the interior, environment and economy, Berlin said.

"The talks will encompass the most important foreign policy questions, such as Iran, North Korea's nuclear programme, the Middle East peace process, as well as economic topics, such as the financial crisis and the read-out from the G8 meeting," Merkel's spokesman, Ulrich Wilhelm, said on Monday.

"They will discuss a wide range of issues, including on security, gas and economic issues," added a Kremlin official on condition of anonymity.

In addition, the two governments are poised to ink a raft of economic partnership deals, including a 500-million-dollar (357-million-euro) credit agreement, Medvedev's foreign policy aide Sergei Prikhodko said on Wednesday.

Among the documents to be signed or adopted will be a joint declaration on energy cooperation and an agreement between Russian Railways and Siemens to establish a joint venture to produce locomotives.

Nevertheless, with Germany easily Europe's biggest customer for Russian gas, the topic of supplies will likely top the agenda, analysts said, with Merkel seeking assurances that the gas crisis in January does not reoccur.

Russian supplies to much of Europe were cut off as part of a payment dispute between Moscow and Ukraine, which had a brutal effect on Germany during a bitterly cold winter.

Timofei Bordachev, director of the Centre for Comprehensive European and International Studies in Moscow, said the issue of shoring up Ukraine as a transit country for Russian gas would certainly feature in the talks.

"Russia and Germany understand each other here, both want to reinforce Ukraine as a reliable transit country for gas deliveries to Europe," he told AFP.

Alexander Rahr, a Russia expert with the German Council on Foreign Relations, said: "We expect new problems coming up, so we will definitely see gas coming up as an issue."

Only three days before the Munich talks, the European Union signed an agreement on a pipeline it hopes will reduce its dependence on Russian gas.

This Nabucco pipeline is a rival to the Nord Stream project -- led by state-controlled Russian gas giant Gazprom -- which would pump natural gas from Russia under the Baltic Sea to Germany.

Medvedev's aide Prikhodko said the talks would certainly encompass a discussion on Nord Stream, adding that on this topic, "cooperation and mutual understanding with the Germans is quite high."

Another bilateral economic issue likely to feature on the leaders' agenda is the possible takeover of troubled German carmaker Opel by Russian-backed Canadian auto parts maker Magna International.

Berlin agreed in late May to support a bid for a majority stake in Opel by Magna, which has teamed up with state-owned Russian bank Sberbank and Russia's second-largest auto maker GAZ.

However, Opel's parent company General Motors has also received interest from Brussels-based investment group RHJ International and from China's Beijing Automotive Industry Company (BAIC), throwing the deal into some doubt.

Prikhodko said Medvedev would push the deal in Munich. "We'll speak out in support (of the deal) and we'll call on (Germany) to support it too ... It's a useful deal," he said.

The atmosphere at the talks is likely to be warm, said Rahr, as relations between the two countries have improved markedly since Medvedev took the helm from Vladimir Putin, now prime minister, who will not be making the trip.

"They are almost back to where they were now. Merkel has shown she can work together with Medvedev," he told AFP.