June 1 (Bloomberg) -- Germany’s backing for a Russian- backed bid for General Motors Corp.’s Opel unit augurs deeper ties between Moscow and Berlin that may trump concerns of ex- Soviet nations squeezed between the two capitals.

Chancellor Angela Merkel’s government picked on May 30 a partnership led by Magna International Inc., a Canadian auto- parts supplier, with Russia’s biggest bank, OAO Sberbank, and Russian carmaker OAO GAZ as the sole bidder for Opel, the European division of GM, the U.S. automaker that will file for bankruptcy today.

“This will fuel suspicion in east Europe over Germany and Russia and why the biggest economy in Europe has tied up with strange Russian tycoons to please the Kremlin,” said Fredrik Erixon, director of the Brussels-based European Centre for International Political Economy. “Germany is playing off the Poles and the Baltic states against Russia.”

Germany is Russia’s biggest trade partner, a relationship underpinned by rising German gas and oil imports. Annual German trade with Russia increased five-fold to 68.2 billion euros ($96.2 billion) last year since 2000. With 6,000 German companies operating in Russia, business leaders in Berlin view the global recession as a speed-bump, with manufacturers set to win contracts as Russia diversifies from energy and rebuilds transport and health care.

Political Fallout

The political fallout from the decision to pick Magna over an offer by Fiat SpA included dissension in Merkel’s government and criticism by Italian Finance Minister Giulio Tremonti, who said Fiat lost by avoiding use of undue political influence. German Economy Minister Karl-Theodor zu Guttenberg threatened to quit over risking taxpayer funds to bail out the company, Bild am Sonntag reported yesterday without citing sources.

Under the Magna proposal, the Canadian company would get a 20 percent stake in GM’s Opel and Vauxhall divisions in Europe. Sberbank would own 35 percent, matching the remaining holding of Detroit-based GM. Magna Co-Chief Executive Officer Siegfried Wolf has described GAZ, based in Nizhny Novgorod, Russia, as its industrial partner.

Underscoring the political and commercial mix, Merkel spoke by phone to Russian Prime Minister Vladimir Putin on May 26 about “trade and economic cooperation.” That followed a May 23 conversation dedicated to Opel, said her spokesman, Ulrich Wilhelm.

Merkel’s predecessor, Gerhard Schroeder, was hired by Russian state gas export monopoly Gazprom OAO months after leaving office in 2005 to head the construction of the Nord Stream pipeline that will provide Russian gas to Germany.

Schroeder backed the increased industry links to Russia.

‘Lucrative Prospects’

“The Russian automobile market promises to again become the most important international market, Schroeder was quoted by DPA as saying. “It offers lucrative prospects.”

The Polish government fears that Europe’s increasing energy dependence on Russian energy via Nord Stream -- which will run from Russia directly to Germany under the Baltic Sea -- might allow Russia to cut gas supplies to eastern Europe while still supplying Germany and western Europe.

Poland’s opposition leader, Jaroslaw Kaczynski, expressed concern that Opel risks cutting more jobs in his country than at plants in Germany, Belgium, and the U.K. “The Polish government should intervene in Germany and with the Russian bank to make sure Polish jobs are guaranteed at the Opel plant,” he told reporters today. “Why are we treated according to different, worse conditions in Europe than other countries?”

Historical Strains

German relations with eastern Europe are still burdened by the memory of Nazi crimes from World War II, while Russia’s relations with the region are blighted by the post-1945 communist takeover by the Soviet Union.

Opel is part of a bigger picture given that Russia views Germany as a key to its global economic policy, said Jan Techau, a European and security expert at the Berlin-based German Council on Foreign Relations.

The move makes sense for Opel because Russia is set to become Europe’s largest car market, said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen in Germany.

Russia is almost as crucial for German exports as China, and Merkel -- who grew up in communist East Germany -- has sometimes adopted policies linked to Russia that are opposed by eastern Europeans. These range from Nord Stream to her rejection of fast-tracking former Soviet republics Ukraine and Georgia for NATO membership.

‘Always’ Politics

“Nothing’s ever purely economic with the Russians, there’s always political interest involved,” Karol Karski, of Poland’s opposition Law & Justice party and a member of parliament’s foreign affairs committee, said in an interview.

For Germany, closer ties to Russia may also mark a bid to ensure a pivotal diplomatic role as the world’s center of gravity shifts away from Europe and President Barack Obama focuses on the Middle East and Asia, says Techau.

“U.S.-Russian relations play out at a different level including security, the soft underbelly of Russia in Central Asia and North Korea,” he said. “These are areas where Europe is a small player and it’s the Europeans who should be concerned that the new Obama policy will squeeze them out of their old mediator role between Moscow and Washington.”

To contact the reporter on this story: Leon Mangasarian in Berlin at lmangasarian@bloomberg.net

Last Updated: June 1, 2009 11:09 EDT