April 26 (Bloomberg) -- Germany has failed to support democratic institutions in Russia by placing oil and gas interests and relations with President Vladimir Putin ahead of human rights, Russian rights activists said.

While Chancellor Angela Merkel's first visit to Russia provided a ``hopeful sign'' that she would alter the pro-Russian policy of her predecessor, Gerhard Schroeder, Germany has failed to provide European leadership in criticizing Putin's policies, Yuri Dzhibladze, founder of the Moscow-based Center for Democracy Development and Human Rights, said today in Berlin.

``We believe that Germany is underperforming in its role as a European leader in working with Russia,'' Dzhibladze said. ``Not attacking Russia, not blaming Russia, but working with Russia to address the problems within Russia.''

Merkel, who placed improved ties with Russia and energy security among the central issues of her six-month European Union presidency, hasn't taken Putin to task enough for human- rights abuses in Chechnya, curtailment of press freedom and concentration of power in the Kremlin, Dzhibladze said.

European Union leaders will meet with Russia to discuss human-rights issues on May 3 in Berlin.

A Moscow march organized by the Other Russia opposition group on April 14 was disrupted by 9,000 riot police with water canon and dogs who detained hundreds, including foreign journalists. Russian authorities are sensitive to opposition protests as a presidential election in March 2008 approaches.

Opposition `Small'

Tanya Lokshina, chairwoman of research institute Demos, said the crackdown revealed the state's weakness and fear that a ``very small'' opposition might be able to pose a challenge.

``The Kremlin would have looked so much better if they simply had left the small group of opposition to quietly walk the street,'' Lokshina said today in Berlin.

The activists said it was naive to believe cooperation with Russia at the cost of human rights concerns was necessary to secure European energy interests. Dzhibladze said Germany's leadership is necessary because of its leverage over Russia and the ``weakened'' position of the U.S. in world affairs.

``While Germany needs Russia oil and gas, especially gas, Russia desperately needs Germany and other countries of the European Union as their buyers,'' Lokshina said.

Putin, in a state-of-the-nation address today, defended Russia's democracy and warned foreigners against interfering in the country's political process. While insisting that Russian democracy is healthy, Putin was frank about the country's economic problems, saying the gap between rich and poor is ``inadmissibly big'' and noted that the ``overwhelming majority'' of pensioners live in poverty.

To contact the reporter on this story: Patrick Donahue in Berlin at pdonahue1@bloomberg.net.

Last Updated: April 26, 2007 09:12 EDT