President Vladimir Putin has warned that relations between Russia and the West will not be any simpler under his successor Dmitry Medvedev.
Mrs Merkel called Germany and Russia "interdependent"
"I do not think our partners will have it easier with Medvedev," Mr Putin was quoted as saying.
The outgoing Russian president made the comments after talks in Moscow with German Chancellor Angela Merkel.
Mr Medvedev, who was elected in a landslide victory earlier this month, will take over as president in May.
Mr Putin was sharply critical of both Nato and Kosovo as he addressed reporters after his meeting with Mrs Merkel.
As well as restating Russia's objections to independence for Kosovo, he also hit out at Nato enlargement, suggesting that as it grew, the alliance was seeking to make itself a substitute for the United Nations.
"You get the impression that attempts are being made to set up an organisation that would substitute for the UN," Mr Putin said, warning that if that happened "the potential for conflict would only increase".
Mr Putin also raised the prospect of an eventual pardon for Mikhail Khodorkovsky, the former oil tycoon who was once Russia's richest man, but is now serving a jail term for fraud and tax evasion.
His supporters say the case against him was politically motivated and the BBC's James Rodgers in Moscow says many in the West have been inclined to agree.
However, Mr Putin insisted that any future decision on Khodorkovsky's fate would lie with the new president, Mr Medvedev.
Speaking after the talks, Mrs Merkel said that relations with Moscow were always a joy, but "sometimes a challenge".
However, she insisted that despite past tensions there had to be co-operation between Moscow and the countries of the European Union.
"Germany and Russia, Europe and Russia, are interdependent. We must find a way to go forward together. There are many things to do," Mrs Merkel said.
Despite a few quips about how Mr Putin marked Women's Day, which is widely celebrated in Russia, it appeared as if the pair had had tough talks, our correspondent says.
Merkel is the first Western leader to meet Medvedev since his election
Germany was not impressed with the manner in which Mr Medvedev was chosen as Russia's next president, in an election which Russian opposition groups and independent election monitors have said was not a free and fair.
Before she arrived in Moscow, a spokesman for Mrs Merkel said Germany viewed the conduct of the election critically.
But with trade ties worth $50bn (£25bn) and a gas pipeline project, the two countries know they have to co-operate, our correspondent says.
Later on Saturday, Mrs Merkel became the first Western leader to meet Mr Medvedev since his controversial win.
Referring to Mr Putin's comments, Mrs Merkel told the incoming president that even if things would not be easier with him, she hoped they would not "become more difficult either".
Mr Medvedev said: "I am assuming we will have a continuation of that co-operation which you have had with President Putin... You have had big negotiations and that makes my task easier."
Mrs Merkel said there would be good co-operation with the new president and that Mr Medvedev would find "open doors" in Germany.
Mr Medvedev has vowed to continue the course of his predecessor, saying he hoped to work in an "effective tandem" with Mr Putin as his prime minister.