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Russian-Venezuelan high-level talks in Moscow might result in military-technical, oil deals - sources

MOSCOW. July 22 (Interfax) - Russian President Dmitry Medvedev will hold talks with Venezuelan President Hugo Chavez who arrived in Moscow on a visit on Tuesday morning.

Chavez' visit will continue until July 23, a Kremlin spokesperson said earlier. The Venezuelan president is also expected to meet with Russian Prime Minister Vladimir Putin, who spoke to Chavez on many occasions while being the president. It will be Chavez' first personal meeting with Medvedev.

Chavez was last in Russia in June 2007.

During this visit the parties are expected to complete their work on an agreement on reciprocal encouragement and protection of investment, said Deputy Prime Minister Alexander Zhukov.

The Venezuelan president may also negotiate the purchase of Russian arms.

"During Venezuelan President Chavez' visit to Russia new contracts can be signed for the supply of Russian arms and military hardware to Caracas," a source in the defense industry told Interfax.

"A number of arms contracts have already been agreed upon and could be signed during Chavez' visit to Moscow," he said.

Venezuela is planning to buy from Russia up to 20 Tor-M1 surface-to-air missile systems and three Varshavyanka-class diesel electric submarines. These contracts could be worth a total of over $1 billion. Subsequently Venezuela is planning to buy six more non-nuclear submarines and several dozen surface vessels of various classes and types, he said.

Russian exporters have offered to Venezuela Mirazh patrol boats of Project 14310, Murena-E air cushion landing craft of Project 12061E, mobile coastal missile systems capable of destroying surface vessels, boats and landing craft at a range of between seven and 130 kilometers.

"Contracts will also be signed for the opening in Venezuela of special technical service centers for post-sale service of the earlier supplied weapons and military hardware," the source said.

Talks are also being held on the of patrol aircraft based on the Ilyushin Il-114 airplane supply to Venezuela. According to early arrangements, Caracas is planning to buy up to 20 airplanes of this kind.

Russia has also received from Venezuela a request for the purchase of Mi-28N helicopters, which cannot be supplied before the second half of 2009. According to independent experts, ten Mi-28N combat helicopters could be supplied to Caracas at the initial stage.

100,000 Kalashnikov assault rifles in the new AK-103 modification have already been supplied to Venezuela under earlier contracts worth a total of around $4 billion, the official said. Two factories are also being built for the licensed assembly of Russian assault rifles and the production of related ammunition. Also, 24 multi-purpose Su-30MK2 fighters and around 50 Russian helicopters, including 34 Mi-17V, ten Mi-35M and three Mi-26T, are being successfully supplied to Venezuela under a contract.

In accordance with the program for re-armament of the Venezuelan Army until 2012, Caracas is planning to spend over $30 billion for the purchase of weapons and military hardware, the source said.

Russian could grant a loan of about $800 million to Venezuela to finance the arms purchases, Russian media outlets said.

The visit by Venezuelan President Hugo Chavez to Russia proves Moscow's plans to increase its economic presence in Latin America, said Vyacheslav Nikonov, a political scientist.

"Russian influence in Latin America has really strengthened since we started paying attention to this region," he said. The key aspect of the visit is the expected signing of contracts for the supply of Russian arms for the Venezuelan army, he said.

Moreover, it is very important for Chavez to meet personally the new Russian president, said Nikonov. "I understand that it will be important for him to establish a personal contact with President Medvedev," the political scientist said.

"The United States will certainly have a negative view of this visit, like of any other foreign contact of Hugo Chavez, who is a source of great annoyance for Washington," he said.

Meanwhile, a source in Lukoil told Interfax that the company management is planning to discuss matters related with it's continued operations in Venezuela with Chavez. In particular, the parties will talk about the completion of the assessment and certification of the Junin-3 field and further steps in this project, he added.

It was expected that Lukoil and the Venezuelan state-owned company PdVSA will set up a joint venture to develop the Junin-3 field situated in the Orinoco Heavy Oil Belt in the eastern part of the country. The company planned to complete the talks on the joint venture in 2007.

Lukoil chief Vagit Alekperov said in late June that the company is not planning to leave Venezuela, despite delays in the signing of contracts under oil production projects.

A source in TNK(RTS:TNKO)-BP told Interfax that the company is also planning to meet with members of the Venezuelan delegation. TNK-BP said earlier that it was interested in working in Venezuela.

In 2007, TNK-BP signed an agreement with PdVSA on joint certification and assessment of the Ayacucho Block 2 in the estuary of the Orinoco river. If both parties remain satisfied with the results of their cooperation, they could decide to set up a joint venture. TNK-BP chief Robert Dudley said that the assessment of the Ayacucho Block 2 is a very complicated project, as the oil there is very heavy. Everything is still at the initial stage and a decision as to whether to carry out this project will not be made earlier than 2009, Dudley said. Total investment in the project could total several billion dollars, he said.

At the same time, Gazprom's subsidiary Gazpromneft, which repeatedly stated that Latin America was one of its promising business opportunities, is not planning any formal meetings with the Chavez delegation.

Zarubezhneft, which also sees a potential in the Latin American mineral resources, would not speak to Interfax about possible meetings with Venezuelans in Moscow.