Chancellor Gerhard Schröder met Russian President in Hamburg on Monday, the first day of a two-day visit that was initially planned to take place in September but was postponed due to the Beslan hostage crisis.

On Monday evening, after talks with Schröder, Putin told reporters Russia is prepared to work with Germany and the European Union toward finding a solution for the conflict in Chechnya.

He said his government had received "suggestions for a greater participation of Germany and the EU" for "settlement of the Chechnya problem." He said the suggestions had been scrutinized closely in Moscow.

"We sould like to adopt these suggestions wholeheartedly," he said, although he did not go into the particulars. German authorities also would not reveal the exact nature of the suggestions presented to Russia.

Questions about Ukraine

Putin also said he was ready to discuss "all the questions at issue" regarding the cancelled presidential elections in Ukraine as well as press freedom and "internal reforms in Russia."

Although economic cooperation, EU ties and educational exchanges between the two countries figure high on the agenda, it’s the uncomfortable issues of the Ukrainian presidential election in a week’s time and the dismantling of Yukos that overshadow the bilateral talks.

The re-run of the controversial Ukraine election, which pitted the pro-western opposition candidate Viktor Yushchenko against the Kremlin-backed Prime Minister Viktor Yanukovych, sent a decisive rift through ties between the European Union and Russia. Schröder, who enjoys a warm personal friendship with Putin in addition to maintaining one of the closest working relationships to Russia, has been put in a difficult position over the situation in Ukraine.

Schröder's Ukrainian conflict

The chancellor likes to see himself as a bridge between the European Union and Russia, but he has found that role hard to reconcile with Putin’s support for Yanukovych. Unlike other EU leaders, Schröder refrained from loudly criticizing Putin for endorsing the fraudulent vote which put Yanukovych into the presidential seat.

Instead, Schröder telephoned Putin twice in the highly charged days following the Nov. 21 ballot while Russia raged over the West’s meddling in Ukraine’s internal affairs.

“There is no doubt that Schröder can raise issues with Putin that other EU leaders can’t and his two calls to Putin showed the respect between the two,” Alexander Rahr, a Russian specialist at the German Council on Foreign Relations, told AFP.

Minimizing the differences

“But at these talks Schröder will not want to make the differences between the two noticeable, for many reasons, such as the energy alliance that Europe wants to build with Russia,” he added.

Schröder will try to minimize the discussions about Ukraine and the only public declaration will be one that both sides can support: endorsement for free and fair elections during the re-run on Dec. 26.

Energy policy

Another issue unlikely to be aired publicly is the German government’s stance on Russia’s auctioning off of the crown jewel of stricken oil giant Yukos on Sunday. During high-profile bidding, a mystery company that is widely believed to be a front for the state-run gas monopoly Gazprom, snatched up Yuganskneftegaz for $9.35 billion (€7.02 billion).

The purchase by the high bidder, a previously unknown Baikalfinansgroup, represents a death blow for Yukos, whose ambitious billionaire founder Mikhail Khodorkovsky was arrested in October 2003 on fraud and tax evasion charges. If the Baikal group turns out to be a front for Gazprom, it would put a large slice of the Russian energy industry back into government hands.

Just ahead of the auction, Gazprom negotiated with a consortium of European banks headed by Deutsche Bank to secure a €10-billion loan to buy Yuganskneftegaz, an attempt many experts saw as an effort to renationalize the Russian oil industry.

“In reality, this is an example of creeping nationalization of a private industry,” said Frank Umbach, an expert for energy security at the Körber-Center Russia.

Keeping the gas lines open

The German government, although aware of the complaints, did not raise any objections to the attempts because, as a spokesman said, “it involves private economic activity.” But by refusing to criticize Gazprom’s bid, “the chancellor endorses the politics of Putin,” Umbach told Deutsche Welle.

Is Schröder afraid of alienating Moscow and risking a change in the Russian-German energy policy? Nearly 40 percent of the country’s natural gas imports come from Russia – Germany is dependent on Russia for its energy consumption.

The head of the research group for Russian studies at the Institute for Political Science, Roland Götz, told Deutsche Welle there is no reason for Schröder to feel he needs to placate Putin.

“It’s a myth to think that German politics have to bend to Russia," he said. "The economy between the two countries would continue to flourish even if the political relations are not so hearty."

However, it’s just as unlikely that Schröder will raise the issue of energy policy as that of Ukraine, said Umbach and doubted that the chancellor will try to influence Putin in any way.

“Schröder is following an energy policy that has little to do with the economic and political interests of Germany and the EU," he said. "It only serves to intensify the personal ties between the two leaders.”