Putin arrives in Venezuela to close multi-billion
arms, oil, and nuclear development contracts

By Darya Korsunskaya and Anthony Boadle
Reuters (UK)

President Chávez gives a replica of the sword of Liberator Simón Bolívar to the Russian prime minister (Photo: AFP)
President Chávez gives a replica of the sword of Liberator Simón Bolívar to the Russian prime minister (Photo: AFP)

CARACAS — Russian Prime Minister Vladimir Putin arrived in Caracas on Friday to meet the two main South American foes of the United States and launch a $20 billion (13.1 billion pounds) venture to tap the vast Orinoco heavy oil belt.

Putin will discuss energy, agriculture and defence issues with Venezuela's leftist President Hugo Chavez and later hold talks with Bolivian President Evo Morales, both fierce critics of what they call U.S. "imperialism" in Latin America.

Russian companies will launch a joint project with Venezuelan state oil firm PDVSA aimed at pumping 450,000 barrels a day — almost a fifth of the OPEC member nation's current output — from the Orinoco belt, which Chavez says holds the world's largest hydrocarbon reserves.

Putin's quick 12-hour visit provides a welcome lift for Chavez, who is facing domestic and international criticism for failing to solve Venezuela's economic woes and attempting to silence opposition to his 11-year rule.

Chavez said Moscow and Caracas would strengthen security ties to "continue increasing Venezuela's defence capability" and move ahead with cooperation on nuclear energy.

"We are not going to build the atomic bomb but we will develop nuclear energy for peaceful purposes. We have to prepare for the post-petroleum era," Chavez said on Thursday.

Facing a national electricity crisis that has caused widespread power outages, Chavez's government is turning to Iran and Russia for help to develop nuclear energy.

Venezuela, South America's top oil exporter, is seeking foreign investment and technology to tap its heavy crude deposits and loans to pay for Russian military hardware.

Since 2005, Venezuela has bought $4 billion worth of Sukhoi jet fighters, M1-17 helicopters and 100,000 Kalashnikov assault rifles. Chavez received more than $2 billion in loans for more Russian weapons during his eighth visit to Moscow in September, including T-72 tanks and the S-300 advanced anti-aircraft missile system.

U.S. Secretary of State Hillary Clinton expressed concern last year that the Russian weapons purchases by Venezuela, a major oil supplier to the United States, could trigger an arms race across Latin America.

Chavez says the United States could attack Venezuela for its oil reserves and his growing arsenal is aimed at countering a planned increase in the U.S. military forces at bases in neighbouring Colombia, Washington's closest ally in the region.

The arms contracts have been watched with concern by Colombia, which has stormy ties with Venezuela.

Orinoco oil venture

A Russian Beriev amphibious plane to fight forest fires arrived on Thursday to help extinguish blazes that have ravaged the drought-scorched Avila mountain overlooking Caracas.

The highlight of Putin's visit will be the rolling out of the joint venture to develop the Junin 6 field in the Orinoco, which will require $20 billion in investments over 40 years.

Venezuela expects the venture to begin producing 50,000 barrels a day by the end of the year.

The Russian consortium involved in Junin 6 are state giant Rosneft, private major Lukoil, Gazprom, TNK-BP and Surgutneftegaz.

PDVSA holds a 60 percent stake in the project, and Caracas says the Russian firm will pay Venezuela a first tranche of $600 million on Friday — out of an agreed total of $1 billion — for the right to take part in the venture.

To boost its sagging output from traditional wells, Venezuela needs to exploit the Orinoco belt, where the oil requires considerable upgrading to turn it into lighter crude.

Putin's first visit to Venezuela is seen as part of an effort by Moscow to help Russian firms expand abroad and own oil assets all over the world.

Industry sources said Rosneft, Russia's largest oil producer, was seeking to buy stakes in four German refineries from Venezuela as part of the Kremlin's drive to encourage its companies' activities abroad.

Rosneft said on Friday it was in talks with PDVSA, but that there were no proposals to acquire its German assets.

Chavez hopes Russian cooperation will reach as far as the space industry. "We could even install a satellite launcher," he said on Thursday.

2 April 2010 — Return to Cover