Brown beef shanks on all sides in mixture of heated butter and oil in a 6-quart Dutch oven. Mix in onions and carrot, stirring until limp. Add garlic, sauerkraut, water, tomatoes and their liquid, pepper and bay leaf. Bring to boiling, reduce heat, cover and simmer for about 3 hours or until meat is very tender.
Remove beef shanks with a slotted spoon. Discard bones and any fat. Return meat to soup in chunks. (At this point, soup may be covered and chilled until ready to serve; skim fat, if necessary).
Reheat soup to serving temperature. Taste and add salt, if needed.