We should not accept any translation of Quraan that makes God a villian of his own creation. Those translations reduce him to Rabbul Muslimeen from Aalameen. One has to find the truth on his or her own, what is dished out in the market has marketing feature in it, some one is having some gains in spreading falsities. This and at 59 other verses have been marketed to malign Muslims by the right wingers. Indeed, the right wing Muslims, Christians, Hindus, Jews and Buddhist make it their business to make the others look bad.
In the middle ages, European leaders commissioned a hostile Quraan translation to foster warfare against Muslim invaders. Later, Muslim leaders produced another translation to inflame Muslims against Christians and Jews. The former was done in 1041 to protect the kings and the latter in 1924 to regain the lost Khilafat. Both groups resorted to mistranslating Quraan to produce fear against each other for their own gains; power consolidation.
Normally, I check three verses before and after the given verse to get the full context. Due to time constraints I will do one before and after, and you can check it yourselves. However, I will warn you, there are two mistranslated versins of Quraan in the market.
In the middle ages, European leaders commissioned a hostile Quran translation to foster warfare against Muslim invaders. Later, Muslim leaders produced another translation to inflame Muslims against Christians and Jews. The former was done in 1041 to protect the kings and the latter in 1924 to regain the lost Khilafat. Both groups resorted to mistranslating Quraan to produce fear against each other.
In Circulation: Believers, take neither the Jews nor the Christians for your friends. (5:51)
5:50 (Asad) Do they, perchance, desire [to be ruled by] the law of pagan ignorance?  But for people who have inner certainty, who could be a better law-giver than God?
 By "pagan ignorance" (jahiliyyah) is meant here not merely the time before the advent of the Prophet Muhammad but, in general, a state of affairs characterized by a lack of moral perception and a submission of all personal and communal concerns to the criterion of "expediency" alone: that is, exclusively to the consideration as to whether a particular aim or action is useful or damaging (in the short-term, practical sense of these words) to the interests of the person concerned or of the community to which he belongs. Inasmuch as this "law of expediency" is fundamentally opposed to the concepts of morality preached by every higher religion, it is described in the Qur'an as "the law (hukm) of pagan ignorance".(Quran Ref: 5:50 )
Mike's note: The word Pagan is not a derogatory word, although it was used in that sense. Paganism is just another way of appreciating the divine like Judaism, Hinduism, Christianity and Islam. A few in the religion business from each one of these religious groups will not agree to it, but the public, that makes you and I, have no problems with it.
Qur'aan - 5:51
يَا أَيُّهَا الَّذِينَ آمَنُواْ لاَ تَتَّخِذُواْ الْيَهُودَ وَالنَّصَارَى أَوْلِيَاء بَعْضُهُمْ أَوْلِيَاء بَعْضٍ وَمَن يَتَوَلَّهُم مِّنكُمْ فَإِنَّهُ مِنْهُمْ إِنَّ اللّهَ لاَ يَهْدِي الْقَوْمَ الظَّالِمِينَ
Ya ayyuha allatheena amanoo la tattakhithoo alyahooda waalnnasara awliyaa baAAduhum awliyao baAAdin waman yatawallahum minkum fainnahu minhum inna Allaha la yahdee alqawma alththalimeena
5:51 (Asad) O YOU who have attained to faith! Do not take the Jews and the Christians for your allies: they are but allies of one another and whoever of you allies himself with them becomes, verily, one of them; behold, God does not guide such evildoers.
[According to most of the commentators (e.g., Tabari), this means that each of these two communities extends genuine friendship only to its own adherents-i.e., the Jews to the Jews, and ,the Christians to the Christians-and cannot, therefore, be expected to be really friendly towards the followers of the Qur'an. See also 8:73, and the corresponding note]
[Lit., "the evildoing folk": i.e., those who deliberately sin in this respect. As regards the meaning of the "alliance" referred to here, see 3:28, and more particularly 4:139 and the corresponding note, which explains the reference to a believer's loss of his moral identity if he imitates the way of life of, or-in Qur'anic terminology-"allies himself" with, non-Muslims. However, as has been made abundantly clear in 60:7-9 (and implied in verse 57 of this surah), this prohibition of a "moral alliance" with non-Muslims does not constitute an injunction against normal, friendly relations with such of them as are well-disposed towards Muslims. It should be borne in mind that the term wali has several shades of meaning: "ally", "friend", "helper", "protector", etc. The choice of the particular term - and sometimes a -combination of two termms-is always dependent on the context]
5:52 (Asad) And yet thou canst see how those in whose hearts there is disease vie with one another for their good will,  saying [to themselves], "We fear lest fortune turn against us." But God may well bring about good fortune [for the believers] or any [other] event of His own devising,  whereupon those [waverers] will be smitten with remorse for the thoughts which they had secretly harboured within themselves-
 Lit., "vie with one another concerning them" - the pronoun referring to the hostile Jews and Christians, for whose good-will the hypocrites within the Muslim community vie with one another by trying to imitate their way of life.
 Lit., "from Himself". Some of the commentators assume that the word fath (lit., "victory" or "triumph") occurring in this sentence is a prophetic reference to the conquest of Mecca by the Muslims. This assumption, however, cannot be correct since Mecca was already in the hands of the Muslims at the time of the revelation of this surah. Hence, the term fath has obviously been used here in its primary significance of "opening" - namely, the opening of good fortune. (Cf. the idiomatic expression futiha 'ala fulan, "so-and-so became fortunate" or "possessed of good fortune", mentioned in Zamakhshari's Asas and in the Taj al’ Arus.) The "other event of God's own devising" may conceivably refer to a divine punishment of the hypocrites apart from the good fortune that might be in store for the true believers.(Quran Ref: 5:52 )
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Mike Ghouse - There has been enormous amount of discussion on this verse. It is not a commandment, but an expression of human nature, that the birds of the same feather flock together. You do not associate with evil doers no matter who they are. Unfortunately, some Muslims have come to believe that "evil doers" are Jews or Christians, reinforced by the injustice meted out to the Palestinians or what happened in Bosnia and Crusades still linger on their minds as Holocaust will continue to linger on our psyche.
They forget that Saddam Hussain was an evil doer killing thousands of Kurds, the Muslims in Sudan are evil doers killing millions, who are Muslims as well. Just as the many a Christians believe that every one but them will go to hell, a segment of Muslims believe in that, both groups making a villain out of merciful God. God was clear in 43:18 that the best among us is the one who does good, and the purpose of diversity is for us to know each other.
Misinterpretations like the above give value to the idea of Your God, his God and my God.