UPDATE 3-German govt distances itself from Schroeder after his Putin meeting
* Former German chancellor pictured in embrace with Putin
* Schroeder blasted for meeting in German media
* Close Schroeder-Putin friendship followed Bush ostracism (Adds reaction from German foreign minister)
BERLIN, April 29 (Reuters) - The German government distanced itself from former chancellor Gerhard Schroeder on Tuesday amid an outpouring of media criticism after pictures were published showing him embracing Russian President Vladimir Putin in St. Petersburg.
The pictures come at a time of high tension between the West and Russia over Ukraine and also underscore German ambivalence about imposing new sanctions on Moscow, despite Chancellor Angela Merkel's criticism of Putin's actions in the crisis.
A spokesman for Schroeder confirmed he was in Russia's second city on Monday for a shareholders' meeting of Nord Stream AG, the Russian-German pipeline joint venture he chairs. But spokesman Albrecht Funk would not say why Schroeder met Putin.
German media reports said the grainy pictures of Schroeder locked in a bear hug with Putin were taken late on Monday evening outside the Yusupov Palace, where he was attending a belated celebration in honour of his 70th birthday on April 7.
"He does not represent the German government," a senior German government official said when asked about the pictures. "It should be clear to everyone that Mr. Schroeder left active politics some time ago."
Germany, which relies heavily on Russia for natural gas supplies, has been trying to defuse tensions over Ukraine and is seen in the West as reluctant to ratchet up sanctions against Moscow. Opinion polls show Germans oppose trade sanctions.
On Tuesday, the European Union imposed asset freezes and travel bans on 15 Russians and Ukrainians. The United States widened sanctions on allies of Putin on Monday.
Sometimes criticised as Putin's apologist, Schroeder, a Social Democrat whose party is now in coalition with Merkel's conservatives, has been the Russian leader's best friend in the West since both were ostracised by U.S. President George W. Bush for opposing the 2003 Iraq invasion.
Gerda Hasselfeldt, parliamentary leader of the Bavarian Christian Social Union (CSU) which is aligned with Merkel's party, said: "I found the pictures alienating. I hope he used the opportunity to talk to (Putin) about the problems."
Andreas Schockenhoff, deputy parliamentary floor leader for Merkel's party, said Schroeder risked undermining the German government as well as his own protege, Foreign Minister Frank-Walter Steinmeier.
"The chancellor and foreign minister have tried to help stabilise Ukraine for weeks and keep the EU together while Putin is trying to destabilise Ukraine and divide the EU," he said. "Pictures like this play into the hands of Putin's propaganda."
But Steinmeier, a fellow Social Democrat who served as Schroeder's chief of staff, said in Copenhagen that his former boss "has no government responsibilities and is therefore free to decide when and where he celebrates his birthday".
Schroeder, chancellor from 1998-2005, has come under fire before for his close relations with Putin. Schroeder became the board chairman of a German-Russian pipeline joint venture with gas monopoly Gazprom Nord Stream after leaving office.
Klaus von Dohnanyi, a former Social Democrat mayor of Hamburg, said talking with Putin was good: "Words are better than weapons to try to find a reasonable solution for Ukraine".
But the German media almost universally condemned Schroeder, who in 2004 was asked if he thought Putin was a "flawless democrat" and replied: "I am convinced he is." Putin celebrated Schroeder's 60th birthday with the German leader in Hanover.
"Schroeder celebrates his birthday with Putin and makes Germany's foreign policy look absurd," said an online commentary for Der Spiegel magazine.
Schroeder cannot carry on with business as usual when the government is trying to "stop his friend Vladimir from pursuing power-hungry policies", it said. "At times like this a former German leader must keep his distance."
The Frankfurter Allgemeine Zeitung newspaper found hugging Putin "ghoulish" when German military observers from the Organisation for Security and Cooperation in Europe (OSCE) were being held hostage by "pro-Putin fanatics" in Ukraine.
Four of seven OSCE observers being held by pro-Russian separatists in eastern Ukraine are German. Berlin has asked Moscow to use its influence to get them all freed. (Editing by Stephen Brown and Gareth Jones)