Russian prime minister Vladimir Putin arrived in Caracas today to meet the two main South American foes of the United States and launch a $20 billion venture to tap the vast Orinoco heavy oil belt.
Mr Putin will discuss energy, agriculture and defense issues with Venezuela's president Hugo Chavez and later hold talks with Bolivian President Evo Morales, both fierce critics of what they call US "imperialism" in Latin America.
Mr Putin and Mr Chavez toured a four-masted Russian tallship, the Kruzenshtern, one of the world's largest sailing vessels used as a fishery school ship, and viewed photos of Russia's victory over Germany in the Second World War in the ship's museum.
Mr Chavez said Moscow and Caracas would strengthen security ties to "continue increasing Venezuela's defense capability" and also look at cooperating 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," Mr Chavez said at a cabinet meeting yesterday.
Facing a national electricity crisis that has caused widespread power outages, Mr Chavez's government is turning to Iran and Russia for help to develop nuclear energy.
Venezuela, South America's top oil exporter and a member of the OPEC oil producers' cartel, 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, helicopters and Kalashnikov assault rifles.
Mr Chavez received more than $2 billion in loans for more Russian weaponry during his eighth visit to Moscow in September, including tanks and the S-300 advanced anti-aircraft missile system.
US secretary of state Hillary Clinton expressed concern last year that the weapons purchases from Russia by Venezuela, a major oil supplier to the United States, could trigger an arms race across Latin America.
Mr 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 US military presence at bases in neighboring Colombia, Washington's closest ally in the region.
The arms contracts have been watched with concern by Colombia, which has stormy ties with Venezuela.
A Russian Beriev amphibious plane designed to fight forest fires arrived yesterday to help Venezuela extinguish blazes that have ravaged the drought-scorched Avila mountain overlooking Caracas.
The highlight of Mr Putin's visit will be the creation of a joint venture between Venezuela's state oil company PDVSA and a consortium of Russian firms to tap the Junin 6 field in the Orinoco oil belt, which Venezuela says has the world's largest hydrocarbon reserves.
The development will require $20 billion in investments over 40 years to produce 450,000 barrels per day, or almost a fifth of Venezuela's current oil output.
Venezuela said on Wednesday the venture would begin producing 50,000 barrels a day by the end of the year.
The Russian companies involved in Junin 6 are state giant Rosneft, private major Lukoil, Gazprom, TNK-BP and Surgutneftegaz.
PDVSA holds a 60 per cent 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.
Mr Putin's first visit to Venezuela, which is lasting just one day, 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 it was in talks with PDVSA, but that there were no proposals to acquire its German assets.
Reuters