Putin and Merkel set for a prickly Russian-German summit?

The Russian and German leaders are set to meet Sunday. But while business between the two nations is good, Germans are concerned over the Kremlin's domestic crackdown.

When Russian President Vladimir Putin flies to Germany on Sunday to open this year's Hannover Messe, the world's biggest industrial fair, it will be one of those key milestones – like the upcoming Sochi 2014 Winter Olympics and Russia's chairmanship of the G-20 this year – that demonstrate to the world that Russia is back as a leading global power and economic force to reckon with. The famous exhibition this year features a Russian theme and a record number of Russian exhibitors.

Also on display will be the German-speaking Putin's polite and professional, if not terribly warm, relationship with German Chancellor Angela Merkel. The two leaders preside over economies that have largely defied the global economic crisis, and the growing trade and economic cooperation between them is one of the few bright rays of light in an otherwise cloud-strewn European picture.

But troubles may be brewing, mainly driven by growing German public concern over the effects of Russia's domestic turn to the right. Since Putin returned to the Kremlin for an unprecedented third term about a year ago, the country has seen the introduction of draconian laws to curb public protests, a crackdown on politically active NGOs, and measures to censor the Internet.

Experts say that Ms. Merkel, who grew up in communist East Germany and speaks fluent Russian, is much more willing to hold Russia to account for human rights violations than her predecessor, Gerhard Schröder, who built a strong personal relationship with Putin before he left office in 2005, and who once referred to the Kremlin leader as an "immaculate democrat."

Mr. Schröder later took a lucrative job as a director of Nord Stream, the Russian-sponsored natural gas pipeline under the Baltic Sea that went online in 2011.

"True, Russian leaders had good relations with Schröder, especially after he left office. That makes you wonder about his motives for being well-disposed toward Russian leaders, doesn't it?" says Alexei Kuznetsov, head of the department of European studies at the official Institute of World Economy and International Relations in Moscow.

"There's no negative relationship between Putin and Merkel. There might be a bit of cooling there. Sure, Germans are not happy about some things going on in Russia, but we're not always thrilled by what's happening in Europe," he says.

'Increasing alienation'

The relationship has also been rocked, in ways that are not yet completely clear, by last month's banking crisis in Cyprus. The little Mediterranean island state has served over the past two decades as a major offshore zone for wealthy Russians, and even Russian state companies, to bank profits and recycle funds into Russia. There is a widespread perception in Russia that Germany enforced tough bailout terms on Cyprus, which will likely lead to major losses for Russian account holders in Cyprus' two leading banks, precisely because rich "Russian oligarchs" would bear much of the pain.

"Germany has been traditionally Russia's key political and economic partner in the European Union. However, over the past two years – and especially with the return of Vladimir Putin as Russian president – there has been an increasing alienation between Moscow and Berlin," says Nadya Alexandrova-Arbatova, head of the department of European political studies at the official Institute of World Economy and International Relations in Moscow.

"Russia has been disappointed with the EU crisis, which has already resulted in damage to the EU's reputation as a model of competent economic policy management. From [Putin's] point of view, Europeans are in no position to lecture other countries on good governance and democracy.... Germany has been much criticized for its management of the eurocrisis, and the continuing failure to find a solution for the problems in Cyprus that isn't at odds with Russia's interests," she adds.

Last November, as Putin's crackdown gathered steam, the German Bundestag (parliament) passed a 17-point resolution, authored by the German government's special coordinator for Russian affairs Andreas Schockenhoff, that demanded Russia observe European norms of human rights and democracy. In a subsequent meeting with Putin in the Kremlin, Merkel broke with Schröder's tradition of not overtly criticizing the Kremlin over alleged human rights violations and asked the Russian leader to explain the harsh prison sentence meted out to two members of the Pussy Riot feminist performance art collective last summer.

Making matters much worse, late last month Russian authorities launched a still-ongoing wave of police raids, apparently aimed at intimidating hundreds of NGOs across the country. Several German-funded groups, including two that are tied to Germany's leading political parties – the Konrad Adenauer Foundation and the Friedrich Ebert Foundation – were among those targeted.

"Our foundations and their partners in Russian society play an important role in the development of German-Russian relations. Measures that impair their work or criminalize them damage our relations," German government spokesman Steffen Seibert told journalists last week.

Merkel is now under intense pressure from human rights groups and political opponents – Germany faces hotly-contested parliamentary elections in September – to go much further in holding Putin's feet to the fire during her meeting with him this weekend.

"Trade fairs are about doing business, but Merkel should make clear to Putin that it cannot be business as usual for Germany’s relations with Russia until the attacks on civil society stop. This is the worst crackdown in Russia in 20 years," Hugh Williamson, Europe director for the New York-based Human Rights Watch said in a statement this week.

Business is business?

But Russian experts argue that the economic fundamentals of the relationship are solid, and that the public mood in Germany will not be allowed to interfere with burgeoning bilateral trade, which was approaching $100 billion in 2012, buoyed mainly by Russian energy exports to Europe and imports of German cars, machinery, and consumer goods. Germany is Russia's second biggest trading partner in the world, after China, while Russia clocks in at a respectable 11th place among Germany's trading partners.

Russian state companies have invested heavily in German assets, particularly energy infrastructure, while many leading German corporations have ignored Russia's endemic corruption and shaky legal foundations in recent years to set up industrial operations in Russia.

Experts say that even if political relations cool a bit, the economic factor has simply become too important to sacrifice on the altar of human rights. They say Putin may face a few gentle, formal criticisms from Merkel this weekend, but nothing resembling the acrimonious dialogue that has thrown Russia's relationship with the US into full reverse in recent months.

"There is a media campaign in Germany, and Europe, which seems designed to convince Western society that relations between us are not good. But I see no basic reason for a chilling of relations," says Vladislav Belov, head of the Center for German Studies at the official Institute of Europe in Moscow.

"Merkel and Putin have professional, emotion-free personal relations. And what we will see is a 'discussion' about human rights issues that will cover the ground, but will not involve any scolding or lecturing of Putin by Merkel. There's too much at stake for that," he says.