Former German Chancellor Gerhard Schroeder has come under fire after pictures were published showing him hugging and smiling at Russian President Vladimir Putin at a time when Russia continues to stir trouble in Ukraine and four German observers are being held hostage by Russian separatists.

A spokesman for Schroeder confirmed he was in Saint Petersburg on Monday (28 April) for a shareholders' meeting of Nord Stream AG, the pipeline supplying Germany with Russian gas directly through the Baltic Sea, circumventing Ukraine, Poland and the Baltic states. Schroeder is chairman of the board at Nord Stream, a position he took just after quitting the German government, despite criticism both in Germany and abroad.

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Der Spiegel reported that Nord Stream threw a birthday party for the 70 year old ex-chancellor, with Putin as a special guest.

Schroeder is still a respected German Social-Democrat and he campaigned last year for the SPD candidate, Peer Steinbrueck, who failed to replace Angela Merkel as Chancellor in the September 2013 elections.

Foreign minister Frank-Walter Steinmeier, Schroeder's former chief of staff who is now involved in brokering a diplomatic solution to the Ukraine crisis, downplayed the impact of the Schroeder-Putin hug: "Mr Schroeder has no governmental responsibility and is therefore free to decide when and where he holds his birthday party or to which events linked to his birthday he participates."

Members of Angela Merkel's Christian Democratic Union were more criticial.

"The chancellor and foreign minister have tried to help stabilise Ukraine for weeks and keep the EU together while Putin is trying to destabilise Ukraine and divide the EU," Andreas Schockenhoff, a CDU member of the Bundestag in charge of German-Russian relations, said.

"Pictures like this play into the hands of Putin's propaganda," Schockenhoff added.

But then it turned out that one CDU member, Philipp Missfelder, also went to the Schroeder celebration in Russia. "Oh boy, oh boy," said one unidentified CDU member to Spiegel in reaction to that news.

The Schroeder-Putin hug could not have come at a more sensitive time, as EU states were just agreeing on which Russian officials to add to a blacklist, with 15 new names added on Tuesday. None of the gas magnates are on the list.