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19 Sep, 2007 05:26

Russia and Venezuela tighten ties

Russia and Venezuela plan to boost bilateral trade, with an emphasis on energy and information technology. The two countries already share several high-profile projects.

Russian and Venezuelan businessmen and officials have met in Moscow to discuss economic cooperation. They concentrated on energy, information technology, and tourism.

Russia’s trade turnover with Venezuela increased seven-fold over the past two years to top half-a-billion dollars. That’s according to Russia’s acting Deputy Prime Minister, Aleksandr Zhukov, who presided over the Russia-Venezuela Business Council.

“One of the problems that’s still dogging economic co-operation between the two countries are the antidumping measures, but I think we will solve that issue very shortly,” stated Mr Zhukov.

One of the highest profile Russia-Venezuela projects is that of independent oil producer Lukoil and state-owned oil major Petróleos de Venezuela in developing the Junin 3 field in the Orinoco River belt.

“We will focus on oil exploration, the revival of abandoned fields and on extraction of heavy crude. We are already working in all three directions, with the most active work taking place on the Junin three project,”  said the head of Lukoil Andrey Kuzyaev.

Earlier this year, Venezuela's President Hugo Chavez issued a decree that re-nationalized the country’s oil companies, creating the state-owned Venezuelan National Oil Company. As a result two major oil companies walked away from their Venezuelan projects, including U.S.-based ConocoPhillips. Now Conoco, which holds a 20% stake in Lukoil, may re-enter the country through the back door. For Lukoil, working in Venezuela comes with some risks.

“They are taking the place of U.S.-centric oil companies that had invested in Venezuela and obviously in the U.S. case, the political wind has changed allowing more neutral companies like Lukoil to come in. If those political winds change again, then Lukoil could conceivably find itself in the same position as the U.S.-centric oil companies,” warned James Fenkner of Red Star Asset Management, Moscow.

Lukoil said joint venture talks with its Venezuelan counterpart are likely to continue into next year.

At the same time Russian business daily Kommersant reports that the U.S. oil firms are looking to return to Venezuela by working with Russian companies.

The paper says TNK-BP is expanding its operations in the country. It comes after Lukoil’s decision to take advantage of special terms for Russian companies in Venezuela.

Kommersant says TNK-BP may have discussed its return to the market in June when President Hugo Chavez visited Russia.