Analysis: Chavez, Medvedev talk oil, arms

By CARMEN GENTILE, UPI ENERGY CORRESPONDENT   |   July 23, 2008 at 11:25 AM   |   0 comments

MIAMI, July 23 (UPI) -- Venezuela and Russia forged new energy ties Tuesday and discussed a possible military alliance between Moscow and Caracas on Venezuelan soil.

While visiting his Russian counterpart in Moscow, ever-outspoken leftist President Hugo Chavez said Venezuela's future sovereignty depended on relationships with countries like Russia, from which South America's largest oil exporter has purchased billions of dollars in arms including 1 million assault rifles and five submarines, as well as assorted military aircraft.

On the energy front, Russia's LUKoil and Venezuela's state-run PDVSA signed a two-year deal to explore the Junin-3 heavy oil deposit in Venezuela's most coveted oil field, the Orinoco Reserve.

Tuesday's deal finalizes an earlier agreement in September when LUKoil also agreed to build a refinery in Venezuela following a thorough exploration of the Junin-3 block.

While details about a future refinery in Venezuela were not made public, Chavez appeared pleased with the outcome of the first day of two-day talks with Russian President Dmitry Medvedev.

Russia's state-owned natural gas producer Gazprom also agreed to work with PDVSA on exploring parts of the Orinoco yet to be fully evaluated at the Ayacucho-3 oil block.

"We can say that Russia and Venezuela have achieved a strategic alliance in the energy sphere," Chavez said following talks with Medvedev during his first day of negotiations in Russia. "We've been slowly traveling this path for the past five or six years and today signed agreements that will allow us to strengthen our cooperation in this direction."

For the last several years Chavez has sought to draw closer energy ties with Russia as part of his agenda of reducing his country's dependence on the United States and other Western petroleum countries.

Last year Venezuela and Iran signed a $4 billion deal to develop a block of Orinoco, with production slated to begin in two years. The Ayacucho-7 block is believed to hold more than 30 billion barrels of oil alone, making it one of the largest in the country.

Venezuela's increased dealings with Russia and Iran, as well as China, play directly into President Hugo Chavez's plans to shrink the portfolio of Western firms in the country.

Chavez has long asserted the Bush administration was keen on seeing him removed from power, because it sees his populist ideals as a threat to national and regional stability.

Chavez administration officials have said repeatedly that if provoked by the United States, PDVSA would have no problem halting oil shipments to the United States, Venezuela's largest customer.

Meanwhile, Chavez also on Tuesday took the opportunity to make his usual inflammatory remarks when he talked of additional arms purchases from Russia and said the world should turn its back on the U.S. dollar in favor of the Russian ruble.

Russia is said to be negotiating with Venezuela the sale of another $2 billion in arms to go along with the $3.5 billion in weaponry Caracas has already purchased, The Moscow Times reported, citing Russian defense officials.

Chavez also proposed that Russian forces would be welcome on Venezuelan soil, if they so desired. The suggestion was not, however, initiated by Russian officials, even though there have been reports this week that Moscow suggested missiles could be sent to Cuba as a response to the U.S. missile defense shield proposal for Europe.

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(e-mail: energy@upi.com)

Topics: Hugo Chavez
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