They're Europe's odd couple. At a time when much of the continent is scrambling to find strategies to contain, avoid, and punish a resurgent Russia, Germany is pushing ahead with the most important and surprising post–Cold War alliance in Europe. Once titanic enemies, Germany and Russia are embracing a slew of big business deals that aim for everything from a joint resurgence in the world's nuclear-energy market to taking over a big chunk of GM's European empire. German technology will upgrade Russia's vast railroad network—and while much of Europe seeks to free itself of energy dependence on Russia, Germany's E.On is buying up Russian gas fields.
The stream of agreements reflects the depth of what has become Europe's most powerful new partnership. Based on a history of close ties, a decadelong surge in trade and investment, and massive German imports of Russian natural gas, Germany has become not only Russia's most important trading partner, but its principal advocate in the West. Germany has vetoed an EU-wide energy market that would reduce Europe's dependency on Russian supplies, and stayed cool on U.S. plans for missile defense. Mikhail Margelov, chairman of the foreign-affairs committee in the upper house of Russia's Parliament, says Germany was Russia's "biggest helper" in its successful attempt to block the eastward expansion of NATO.
Their friendship has survived wars and crises, from Russia's cutoffs of gas supplies to Eastern Europe to the continuing occupation of Georgia. It has also endured Chancellor Angela Merkel's recalibration of relations following the somewhat sinister Russophilia of her predecessor turned Kremlin lobbyist, Ger-hard Schröder, who pushed through a controversial pipeline for Russian gas that will increase Germany's dependence on the state-controlled Russian gas company Gazprom. Merkel—who speaks Russian and whose East German background has made her more skeptical of Russia than her predecessor—has made a point of meeting with Russian dissidents and cultivating closer ties to Germany's East European neighbors, whom Schröder largely ignored. She has also excised from Germany's foreign-policy lexicon the Paris-Berlin-Moscow axis that Schröder promoted. But because Russia's relations with the rest of Europe have deteriorated since the Ukrainian gas wars and the Georgian conflict, Germany is now arguably closer to Russia, relative to the rest of the continent, than it was under Schröder. Merkel has dialed back in tone and substance—yet remains one of the most pro-Russia leaders in Europe.
For Germany, the continued relationship is about more than money. In the diplo-speak of the German Foreign Ministry, Berlin's policy of "rapprochement through interdependence" is an attempt to bind a resurgent Russia into the European order with a tight web of economic, political, and social ties. This view of Germany's historical mission goes far beyond pro-Russian Social Democrats like Schröder. "We Germans have a closer connection and affection for Russia than any other country," says Andreas Schockenhoff, deputy whip in the Bundestag for Merkel's conservative Christian Democrats. "We can build a bridge between the West and Russia, and end Russia's isolation."
Germany's special relationship to Russia goes back decades, if not centuries. Some trace it back to the arrival of German settlers who colonized great swaths of the Volga plain in the 17th century. Others point to the policy of Ostpolitik in the 1970s that sought closer relations to the Soviet Union, including the financing and construction of the first Russian-German gas pipeline against Washington's vehement objections. In its own complex and tortuous history, Germany, like Russia, has veered between Western and Eastern orientations politically, culturally, and intellectually. Perhaps this historical kinship is why, to this day, there is a widespread feeling, expressed in statements like Schockenhoff's, that Germans have a special affinity to the Russian "soul."
More recently, the driving force behind this relationship has been trade, which has quadrupled in the past decade, from €15 billion in 1998 to €68 billion last year (though it is down by 30 percent this year due to falling energy prices and canceled orders for German machinery). While Germany trades less with Russia than with Belgium or Switzerland, business is concentrated in a few strategic industries, and for many companies in these sectors, Russia is the fastest-growing and potentially most lucrative market—more important than China for German companies like E.On, Siemens, and Dresdner Bank. For instance, while Royal Dutch Shell and Britain's BP were squeezed out of lucrative oilfield-development projects in Russia, E.On—connected to Gazprom through a web of interlocking businesses—this June won a 25 percent share of the Yuzhno-Russkoye gas field, one of the world's biggest.
The pace of high-profile business deals this year has been dizzying. In March, Munich tech giant Siemens announced it would abandon its joint venture with France's Areva and partner instead with Russia's Rosatom to build as many as a fifth of the world's nuclear plants. In May, Berlin picked a consortium that includes Kremlin-controlled Sberbank and automaker GAZ to take over General Motors' ailing German unit, Opel, oiled by up to €4.5 billion in German taxpayer funds. At a busy summit meeting in Bavaria's Schleissheim Palace in July, Merkel and Russian President Dmitry Medvedev announced a raft of fresh deals, including the creation of a Russian-German energy agency and a €500 million package of emergency trade finance to keep German exports flowing east. To date, some 5,000 German companies have set up shop in Russia—supplying consumer goods, equipping factories, and building infrastructure. Russian business is "a matter of life and death" for these companies, says Michael Harms, head of the German-Russian Chamber of Commerce.
Those business ties have clear political consequences. "When you run an export-dependent economy like Angela Merkel does, you run your foreign policy based on two things: access to resources and finding markets for goods that Germany makes," says Tomas Valasek at London's Centre for European Reform. But whether Germany's soft-power strategy has reaped any benefits is unclear. Merkel supported last summer's deal that forced Russia to withdraw from parts of Georgia, and to adhere to the EU's ceasefire—but it was brokered most publicly by French President Nicolas Sarkozy, not Berlin. Medvedev also backed away from talk last November of stationing missiles in Kaliningrad after Germany expressed disapproval. Yet Fyodor Lukin, editor of a leading Russian policy journal, argues this was not a real diplomatic victory, but rather the political equivalent of a bait and switch—that is, creating a problem and then demanding credit for making it go away. "There was never any serious plan to put missiles in Kaliningrad," he says. "It was pure rhetoric."
There are also no signs that Germany's policy of engagement has curbed Russian saber-rattling on Georgia, or its empire-building in the former Soviet sphere. Russian Prime Minister Vladimir Putin "knows exactly how to play us," says Jan Techau of the German Council on Foreign Relations. "He knows our reflexes and our ingrained pacifism." Indeed, it may be the Russians who understand the Germans' soul, rather than vice versa.