Merkel and Medvedev paper over cracks at talks

By Oleg Shchedrov

ST PETERSBURG, Russia (Reuters) - Russian President Dmitry Medvedev and German Chancellor Angela Merkel on Thursday played down tensions over Georgia, emphasizing the importance of trade and cooperation in talks in Medvedev's home town.

"We have differences but we also have areas where we can have cooperation," Merkel said at a joint news conference with the Kremlin leader. She said the atmosphere of their meetings had been good.

Merkel said Georgia's territorial integrity remained non-negotiable, implicitly rebuking Russia for recognizing the two rebel regions of South Ossetia and Abkhazia as independent states.

But she otherwise avoided criticizing Moscow which sent in troops into Georgia in August to crush a bid by government forces to reassert control over South Ossetia.

Germany is Russia's biggest trading partner and since the Soviet Union's collapse in 1991 has acted as a bridge between Europe and Russia, a role it is keen to maintain.

Merkel said Germany's position on NATO membership for Georgia and Ukraine had not changed since the military alliance decided at a summit in Bucharest earlier this year that they could join eventually.

"There will be a first evaluation (of whether they should take the next to membership) in December, not more, not less," Merkel said in response to a question.

Medvedev said earlier that the talks with Merkel and her delegation, under the umbrella of an annual Russian-German forum called the St Petersburg Dialogue, had been useful.

"Our consultations demonstrated the maturity of the Russian-German partnership, an ability to listen to a partner, to take into account each others' interests despite differences," he said.

Russia sees the annual gathering of politicians and businessmen from the two countries as a good opportunity to try to resume "business as usual" with leading European partners, who have condemned Russia's military operation in Georgia.

Tbilisi attempted to seize control of South Ossetia with a military assault in early August, triggering a counter-attack by Russian troops. The United States and Britain have since not sent any top level officials to Russia.

But France, current holder of the EU presidency, and Germany have been keen not to break off contact.

Merkel said she and Medvedev had discussed the "Nord Stream" project -- a 7.4-billion-euro gas pipeline to deliver Siberian gas to Europe under the Baltic Sea and that Germany remained keen on the plan.

Nord Stream, she said, was needed not just by Germany but many other European countries.

The highlight of the St Petersburg gathering was the signing of a deal between Russia's gas monopoly Gazprom and Germany's E.ON on an $5 billion asset swap.