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Russian, German Leaders Meet For Economic Talks

Russian President Dmitry Medvedev (left) and German Chancellor Angela Merkel hold talks near Munich.
Russian President Dmitry Medvedev has met German Chancellor Angela Merkel at the picturesque Schleissheim Palace near Munich for talks dominated by economic issues.

But the original agenda was overshadowed by the murder on July 15 of the prominent Russian rights activist Natalya Estemirova.

Merkel voiced dismay at the murder, while Medvedev said he was confident Estemirova's killer would be found and punished.

Otherwise, it was the two countries' substantial economic ties that dominated talks. Following a private meeting, the two leaders were joined by top officials including both countries’ economy ministers.

The two sides agreed a number of deals, including one for Siemens to deliver trains to Russia.

On gas, the two discussed the planned Nord Stream pipeline to bring Russian gas directly to Germany via the Baltic Sea.

Medvedev called on Sweden, which has expressed environmental concerns, to clear the project so that construction could begin.

And then there was the Russian-backed deal to buy carmaker Opel.

“We had quite a long discussion today about the Opel project involving Magna and Sberbank,” Medvedev said. “There are still some unresolved issues, but we are looking at this project with interest and optimism and we will try to move ahead with its realization."

Those "unresolved issues" have thrown into doubt a preliminary deal reached at the end of May.

Under that deal, Canadian car-parts maker Magna along with Russian truckmaker GAZ and Russian bank Sberbank were to acquire more than 50 percent in Opel.

The German government, keen to safeguard jobs, agreed to provide a $2.1 billion bridge loan.

However, since then, talks have stalled.

Opel's parent company General Motors has received interest from two other suitors -- China’s Beijing Automotive Industry Company and RHJ International, a Belgium-based investment group.

RHJ even said this week that its own negotiations with GM were "at an advanced stage."

Talks are believed to have hit snags partly because Magna wants to control the distribution of GM's Chevrolet brand in Russia.

Mark Bursa, a British auto industry analyst, says another reason is that GM is now in a stronger position.

"Since the decision was taken to sell off the European operations the company's been into Chapter 11 [bankruptcy protection,] come out of Chapter 11, it's emerged quite a strong company, it has shifted a lot of debt off its balance sheet, and secretly the [CEO] Fritz Henderson perhaps realizes he doesn't actually want to sell GM Europe Opel Vauxhall,” Bursa said. “There's a feeling in GM they might have been forced into doing something for political reasons at the end of last year and now the game has changed."

The German government has so far favored Magna, and it has put pressure on GM by saying it could withdraw financial aid for the deal if GM chooses another suitor.

Merkel today repeated her support for the Magna deal, saying it "offered Opel a chance."

But like Medvedev, she said some issues still needed to be resolved.