It's actually the reverse and was due to the different smells between the fuels used.

Another serious training mistake was revealed later; the Soviets used their own diesel engine tanks to train the dogs rather than German tanks which had gasoline engines.[5] As the dogs relied on their acute sense of smell, the dogs sought out familiar Soviet tanks instead of strange-smelling German tanks.[7] (Anti-tank Dogs)

They weren't widespread and saw limited use, but worked occasionally. The Germans and Americans flirted with the idea but the Americans canceled for safety reasons and I coudn't find much of anything about the Germans program.