Schroeder and Putin preside over major business deals between Russia, Germany

German and Russian companies on Monday signed natural gas and rail equipment deals worth billions, hailed by Chancellor Gerhard Schroeder and President Vladimir Putin as the fruits of ever-closer economic ties between their countries.

An agreement between BASF AG and Russian energy company Gazprom allows a foreign company to be a partner in developing a Russian gas field for the first time, Putin said in announcing the accord at the Hanover Trade Fair.

"This will strengthen our economic cooperation, and will also promote energy stability in Europe and on world markets," Putin said.

Deals signed at the summit were designed not only to expand German-Russian cooperation in production, transport and sale of gas, but also to link energy companies in both countries more closely through joint stakeholdings.

German engineering conglomerate Siemens AG and OAO Russian Railways signed a Ђ1.5 billion (US$1.94 billion) contract for building high-speed and intercity trains in Russia at the trade fair, where Russia is this year's featured country.

Schroeder said the memorandum of understanding between Gazprom, the world's largest gas producer, and BASF's Wintershall unit should pave the way for other companies.

"This is a historical first," he said at a news conference with Putin. "I am certain that this terribly important and wide reaching partnership will ... serve as a good example."

Schroeder and Putin have underpinned the friendly business climate with a close personal relationship, helped by the fluent German that Putin speaks from his time as a KGB agent in former communist East Germany.

In building ties, Schroeder has favored pressing Putin discreetly over his growing control over Russian business and politics, in contrast to the blunter U.S. approach.

Gazprom and Wintershall said they will jointly develop the Yuzhno Russkoye field in western Siberia and cooperate on a gas pipeline through the Baltic Sea.

BASF Chief Executive Juergen Hambrecht said the pipeline, due to be started this fall and completed in 2010, was a US$2 billion (Ђ1.5 billion) project, while the gas field development was worth US$1 billion (Ђ773,000). He gave no detailed breakdown.

The field is believed to have a volume of some 500 billion cubic meters of gas, enough to cover all of Germany's gas consumption for five years.

Gazprom also said it will increase its share in a joint venture with Wintershall, signaling the Russian supplier's increased commitment to the European gas market.

Gazprom CEO Alexei Miller said his company will raise its stake in the Wingas joint venture to 50 percent minus one share from 35 percent. He said the deal will involve an "exchange of assets" with Wintershall, but no cash. Wintershall currently holds 65 percent in Wingas.

Miller said the pipeline would give Gazprom access to British and Scandinavian markets and also provide a more secure route than surface pipelines. "By building this pipeline we can reduce the risk of transporting gas through other countries," he said.

Meanwhile, Gazprom said it is selling a 25 percent stake in the Yuzhno Russkoye field to German energy company E.On AG. Miller underlined that Gazprom intends to remain the field's majority owner.

Germany buys about a third of its oil and gas from Russia, and Gazprom has about a 25 percent share of gas supplies on the European market.

Overall German-Russian two-way trade grew some 22 percent last year to a record Ђ31 billion (US$40 billion). Germany's top seller in Russia is machinery; imports were mostly energy products and raw materials.

The train deal gives Russians the prospect of vastly modernized rail transport on several major routes.

The Siemens trains can reach 300 kilometers an hour (186 mph) and will be built mostly in Russia, the state railroad RZD said. They are intended for the heavily traveled Moscow-St. Petersburg and St. Petersburg-Helsinki, Finland routes. Other potential uses were on the Moscow-Nizhny Novgorod and Omsk-Novosibirsk routes.

The first train is scheduled for delivery by the end of 2007.

DAVID RISING, Associated Press Writer

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