By Oleg Shchedrov
ST PETERSBURG, Russia (Reuters) - President Dmitry Medvedev, who hosted German Chancellor Angela Merkel in his home town on Thursday, said the partnership of the two states has survived tensions caused by the August war in Georgia.
"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 told the "St Petersburg Dialogue."
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.
Talks between Medvedev and Merkel, which follow the meeting which they attended, are expected to focus on building up economic ties, including the ambitious "Nord Stream" project -- a 7.4-billion-euro (15.3 billion pound) gas pipeline to deliver Siberian gas to Europe under the Baltic Sea.
The highlight of the gathering was the signing of a deal between Russia's gas monopoly Gazprom and Germany's E.ON on an asset swap.
Despite the energy deals, strains over the Georgia invasion persisted.
"We view Russia's reaction (in Georgia) as disproportionate and said trust must be rebuilt," Merkel said.
Germany is Russia's biggest single trading partner with bilateral turnover expected to reach $60 billion (34 billion pounds) this year. But ties were badly damaged in August by Russia's brief conflict with Georgia, drawing widespread condemnation in the West.
COMMON PROBLEMS
Medvedev said Russia and Germany should work together to overcome the international financial crisis and redesign the U.S.-centred global economy.
"Problems connected to the (financial) crisis are paramount, the rest have stepped back," he said. "The events showed that the time of domination by one economy and one currency are irreversibly gone."
"A collective effort is needed to tackle the crisis caused by (U.S.) financial egoism," he said.
Russia has stepped up its anti-U.S. rhetoric following attempts by Washington to encourage the European Union to ease energy reliance on Russia.
The "Nord Stream" pipeline is a controversial project. Russia and Germany say the pipeline will boost gas supplies to Europe and make it less dependent on potential problems with transit states like Ukraine.
But some European governments, including Poland and the Baltic states, say the project will contradict an EU policy of diversifying energy sources.
"The sides are planning to discuss political support for building, on time, the trans-border gas transit system 'Nord Stream'," a Kremlin source said.
Gazprom's deal with E.ON, which gives the German company a stake in Russia's Yuzhno-Russkoye gas project, is another sign of stronger economic ties. Medvedev and Merkel oversaw the signing ceremony.
Merkel has been highly critical of Russia's war with Georgia, which began after Tbilisi launched a military assault to retake the separatist province of South Ossetia.
But she has backed a deal mediated by French President Nicolas Sarkozy, under which Russia agreed to pull out of core Georgian territory by October 10, as the European Union deploys monitors in the Caucasus state.
Medvedev said on Wednesday that Russia would carry out its promise on time. Top EU officials have said Moscow's readiness to adhere to the Sarkozy plan had helped to restart talks on a Russia-EU cooperation pact.
Moscow says it had to send troops to Georgia to avoid bloodshed in the region where it has carried out a peacekeeping mission since the early 1990s.
Russia is striving to show that the Western condemnation of the Georgia war has not led to Russia's isolation in Europe. Last month Prime Minister Vladimir Putin and his French counterpart Francois Fillon held an inter-government commission in the Black Sea resort of Sochi.
