German Chancellor Angela Merkel was to meet Russian President Dmitry Medvedev here Thursday as the major trading partners moved to overcome strains sparked by the recent war in Georgia.

The leaders, accompanied to Russia''s former imperial capital by senior ministers, were also to discuss global financial turmoil and Iran''s controversial nuclear programme, a senior German government official said.

Germany is widely considered Russia''s closest ally in Western Europe, but ties frayed when Russian troops rolled into Georgia in August after Tbilisi tried to reclaim control of the Moscow-backed rebel province South Ossetia.

Merkel has been sharply critical of Russia''s actions there, but has stood out in the European Union by pressing for the lines of communication with Moscow to remain open.

Thursday''s talks were expected to touch on an EU monitoring mission charged with ensuring security as Russian forces pull back from "buffer zones" around South Ossetia and fellow rebel enclave Abkhazia by October 10.

An EU summit this month due to debate the resumption of negotiations with Russia on a new partnership and cooperation pact was also on the agenda, the senior German official said.

Since the August war tensions over Georgia have spilled over into other areas of German-Russian cooperation.

Russia last week pulled out of a meeting at the UN General Assembly of foreign ministers from Germany and four other world powers working to resolve a crisis over Iran''s disputed nuclear programme.

German Foreign Minister Frank-Walter Steinmeier scrambled to bring Moscow back to the table and the group -- which also includes Britain, China, France and the United States -- finally agreed on a new UN Security Council resolution confirming sanctions against Tehran.

Trade, however, is seen as the foundation of German-Russian relations.

Some 4,600 German firms have subsidiaries in Russia and every fourth machine imported by Russia is made in Germany.

German exports to Russia jumped 23 percent in the first half of this year to 15.8 billion euros (22.3 billion dollars), according to the Committee on Eastern European Economic Relations. Russian exports to Germany in the same period totalled 16.7 billion euros.

An industry delegation was to travel with Merkel, including the German energy agency president, the chief executives of chemicals behemoth BASF and engineering giant Siemens, and the head of the Committee on Eastern European Economic Relations, which represents German exporters.

Medvedev and Merkel were due to meet at 1045 GMT to be followed by a joint press conference.