Heat the oven to 482°F (250 °C) and put the shanks to bake. After 15 min., lower the oven to 329°F (165 °C). Bake the shanks about 2 hours, then remove from the oven.
Chop the sauerkraut finely, sprinkle with the oil and paprika. Add the bay leaf, black pepper, as well as all of the liquid from the baking of the steaks. Stir everything very well.
Put the sauerkraut with the shanks in a preheated 482°F (250 °C). Bake about 35-40 min., while stirring from time to time. Before serving, cut up the shanks.