Zee Beam News

PARIS (by columnist Angela Charlton for RIA Novosti) - In the world of Vladimir Putin and Gerhard Schroeder, Russia's business climate is safe and inviting. In the real world of German investors and Russian executives, things look cloudy and forbidding. Putin and Schroeder tried hard Monday to sell their version of the world to the crowd at the Hanover industrial technology fair. The two men were as friendly as ever, but that may not be enough to revive investment in Russia, or to smooth over Russia's troubled relations with the European Union. The two leaders didn't discuss - at least publicly - the main reasons for slumping western investment in Russia: the crackdown on oil giant Yukos and Putin's political direction, both of which make investors fear for the future. Putin, as usual, didn't mention Yukos but dismissed concerns about re-nationalizing other companies, and promised to make Russia's economy even more liberal and open in the coming years. Schroeder, meanwhile, suggested that investors should be putting more money into Russia, not less. Putin needed this confirmation of the sturdy Russian-German relationship ahead of an EU-Russia summit next month, which promises more conflict than camaraderie. The questions of Yukos and Russia's democratic future are sure to get open airing, along with differences over Chechnya and the revolutions that have swept Ukraine, Georgia and Kyrgyzstan. Schroeder didn't dwell on these questions Monday, and the two leaders kept their talks purely economic. That was just what Putin needed, a chance to show off his liberal market credentials instead of being forced to defend his less-than-liberal political views, as he was when meeting with U.S. President George Bush in February. Putin was right to try to soothe German investors, since Germany is Russia's biggest trade partner, and other European and North American investors often follow the German lead on how and where to put their money in Russia.It remains unclear whether they were convinced by his appeal. The German-Russian relationship rests heavily on the two leaders' personal bond, and enormously on gas. Schroeder seemed to suggest that investors' concerns about Russia were not worth damaging the crucial partnership that keeps German homes heated with relatively cheap Russian gas. And one of the key deals Putin and Schroeder announced Monday was for joint gas extraction with Gazprom and German businesses. Schroeder recognizes the danger in such single-minded trade and tried to encourage cooperation in hi-tech, too. But many German and other western firms are waiting to see what happens to a key non-gas cooperation deal between the two countries, under which Siemens would build much-needed high-speed trains for Russian markets. The plan, which both presidents enthusiastically announced last year, has faced months of resistance from Russian conservatives trying to protect the strategic railroad industry. Such Cold War-style fears that foreign investors are spies intent on ruining the Russian economy undermine Putin's liberal arguments. A more legitimate Russian fear, however, is that German companies could shift their Russian investments to Ukraine. Ukraine's aggressively pro-EU policies and its rising star status as a new democracy form attractive alternatives to Russia's unpredictable tax inspectors and nationalist policies. In the political sphere, EU officials already compare Russia to Ukraine, unfavorably. This further angers Kremlin policymakers, insulted at even being lumped in the same category as poorer, smaller Ukraine. The Kremlin also feels betrayed by Ukraine, which Russia sees not as a colony but as a natural partner. Schroeder's voice in the EU is increasingly diluted by those of new, less Moscow-friendly voices from central and eastern Europe. But Germany is still the EU's biggest economy, and it's good news for Russia that Schroeder is in no hurry to abandon his relationship with Putin or Russia's gas companies. Russia's leaders see comfort, not irony, in the fact that Germany is its strongest European ally ahead of grandiose Russian celebrations marking the 60th anniversary of the Nazis' defeat.