German Chancellor Angela Merkel and Russian President
Dmitry Medvedev met business leaders early Tuesday in the northern German town of Hanover, ahead of joint government talks, DPA reported.
Business cooperation, particularly in the energy sector, was billed as an important topic for the 13th German-Russian government consultations, attended by a delegation of ministers from both countries.
However, business relations are also marred by issues including Russia's ban on German vegetables following an E-coli outbreak earlier this year, and tough visa requirements for Russians travelling to Germany.
Merkel and Medvedev held bilateral talks over dinner late Monday. The "friendly" conversation included developments over the euro currency as well as the situation in Libya, said Merkel's spokesman Steffen Seibert.
The meeting has been overshadowed by a row in Germany over a prize which was to be awarded to Russian Prime Minister Vladimir Putin, honouring his contribution to German-Russian relations.
The little-known Quadriga prize was withdrawn at the weekend, after critics complained that it ignored the premier's poor human rights record. Both countries have been keen to insist that the incident would not harm relations.
Ahead of the two-hour government consultations, the two leaders were due to attend Tuesday's closing session of the Petersburg Dialogue, a regular meeting between civil society representatives from both countries, which began Sunday.
Germany and Russia have been holding annual government consultations since 1998. Berlin only holds such consultations with seven other countries, including France and Israel, as well as India and China who both came on board this year.