Russian President Vladimir Putin was expected to hold talks with German officials during a visit here Sunday on differences over Cyprus' financial crisis and concerns about the Kremlin's crackdown on civil society organizations.
Germany is Russia's No. 3 trade partner, but ties have become increasingly strained recently over the Kremlin's heavy-handed response to opposition groups, differences over the Syrian crisis and other issues.
The Cyprus crisis, which has badly bruised Russian investors, has become the latest irritant, and it is expected to figure high on the agenda of Putin's talks Sunday with German Chancellor Angela Merkel in Hannover, where the two leaders will attend a trade fair Monday.
Before the meeting, several dozen people protested outside the Hannover convention center against the Russian government. Merkel told German ARD television in Hannover on the sidelines of the trade fair's opening ceremony on Sunday night that while the two countries had close economic relations, "our political talks will also incorporate controversial topics."
Speaking to ARD television before the visit, Putin harshly criticized the tax on bank deposits introduced by Cypriot authorities as condition for a 10 billion euro ($12.8 billion) bailout from international lenders. Savers with more than 100,000 euros at the Bank of Cyprus could face losses of up to 60 percent on their savings as part of the rescue deal.
Russian depositors, who hold as much as 20 billion euros ($26 billion) in Cypriot banks, are expected to be among those who will suffer most.
"Is that fair, that people invested their funds, merely deposited their money with banks without breaking any laws, whether the laws of Cyprus or those of the European Union, just to see 60 percent of their deposits forfeited?" Putin asked. He added that the Cypriot move "undermines the credibility of the banking system of the entire eurozone."
Putin angrily rejected allegations that Cyprus had become a "laundry for dirty money" from Russia, saying that such claims have to be proven and that the EU has allowed the creation of an offshore zone on Cyprus and other places in Europe.
"If you consider such zones a bad thing, then close them," Putin said. "Why do you shift responsibility for all problems that have arisen in Cyprus to investors irrespective of their nationality?"
Despite the hard rhetoric, Russia has turned down Cyprus' plea for financial assistance, submitting to the EU's demand to stay away as it negotiates a bailout. The Kremlin's careful stance on the crisis reflected its reluctance to risk a falling out with the EU, its main trading partner, and with Germany in particular.
Merkel is seeking a third term in September elections, and Germany has argued that it was right for big investors to contribute to the rescue of Cyprus. Merkel said after the deal that a "fair sharing of the burden" was achieved.
Along with Russian grievances about Cyprus, Putin's talks with Merkel could brush upon the Russian government's crackdown on non-governmental organizations, which Putin sees as tools for Western interference in Russia's domestic affairs.
He has accused the U.S. of instigating large street protests against his re-election to a third term in March 2012, and launched a sweeping crackdown on dissent since his inauguration.
One of the repressive Kremlin laws quickly approved last year required all NGOs that receive funds from abroad and engage in vaguely defined political activities to register as "foreign agents," a term invoking Cold War-era spying connotations that is intended to destroy the activists' credibility with voters.
Leading Russian NGOs have pledged to boycott the bill. Putin responded by ordering wide-ranging checks of up to 2,000 NGOs across the country to check their compliance with the law. The NGOs targeted, among others, were the German Konrad Adenauer Foundation, which is aligned with Merkel's conservative Christian Democratic Union, and the Friedrich Ebert Foundation, which has links to the center-left Social Democratic Party.
Putin defended the raids on NGOs in the ARD interview, saying that "the only thing we want to know is who receives the money and where it goes."
He also rejected Western criticism of Russia's stance on Syria, saying that the "massacre" in the civil war-torn Arab country must be stopped, but that it could only be done through talks between the government and the opposition.
Putin rejected the West's criticism of Russia for continuing to supply weapons to Syrian President Bashar Assad's regime, saying that such shipments do not violate international law. The Russian president criticized those who send weapons to the Syrian opposition, who he said were fighting a "legitimate government."