Bloomberg News

Russia Lends Venezuela $4 Billion in Return for Oil Projects

October 07, 2011

(Updates with details of bilateral bank financing from seventh paragraph.)

Oct. 7 (Bloomberg) -- Russia agreed to lend Venezuela $4 billion through 2013 for defense spending in return for gaining access to heavy crude and offshore gas fields in the South American country.

Russia’s OAO Rosneft and OAO Gazprom signed a cooperation accord with Venezuelan state oil company Petroleos de Venezuela SA late yesterday at a ceremony in Caracas led by President Hugo Chavez and Russian Deputy Prime Minister Igor Sechin.

“We’re working on large-dimension projects from oil, gas and petrochemicals to finance, banking and trade,” Chavez said on state television.

Chavez, who has led the OPEC-member nation since 1999, has strengthened ties with Russia during his 12-year rule in a bid to re-equip his military after a U.S. arms embargo in 2006 and to attract investment in the energy industry.

The $4 billion defense loan will be disbursed in two equal parts in 2012 and 2013, Chavez said today. In the last five years, Chavez has purchased more than $4.4 billion of fighter jets, air defense systems, helicopters and weapons from Russia while denying that he was fueling an arms race in South America.

“We’re not a threat to anyone,” Chavez said yesterday. “We’re modernizing our armed forces that were totally defenseless.”


In a separate agreement, the two countries agreed to commit $2 billion each to boost the capital of a bi-national bank, known as Evrofinance Mosnarbank SA, that will provide lending for housing projects and a joint-venture oil project in the Junin 6 block, he said.

Venezuela paid $400 million in February to buy a 49 percent stake in Evrofinance, according to Moscow-based news agency RIA Novosti. Evrofinance opened an office in Caracas July 25, according to the Official Gazette said.

The Junin 6 block is a joint venture between PDVSA and a group of Russian oil companies, including OAO Lukoil, TNK-BP and OAO Gazprom Neft, that expects to begin production in May 2012.

Evrofinance was hired to co-manage a $4.2 billion Venezuelan government bond sale in August, along with Deutsche Bank AG. The Moscow-based bank, which has a branch in Caracas, is 49.9 percent owned by Venezuelan state development bank Fonden with the rest controlled by Russian banks VTB Group and Gazprombank Group, according to the bank’s website.

Rosneft will develop the Carabobo 2 heavy-crude block in the Orinoco as a minority partner with PDVSA. Carabobo 2 was the last block to be assigned under a 2010 bid round.

Venezuela assigned the other two blocks to groups led by Chevron Corp. and Repsol YPF SA last year.

Natural Gas

State-controlled gas producer Gazprom will explore for natural gas in the Gulf of Venezuela, close to the Perla field where Eni SpA and Repsol have 15 trillion cubic feet of certified gas reserves.

Gazprom and PDVSA agreed to consider a joint venture to develop the Robalo gas deposit, the Moscow-based gas exporter said today in an e-mailed statement. The companies will hold talks to define stakes, it said.

Chavez said yesterday that he plans to travel to Moscow soon to meet with Russian Prime Minister Vladimir Putin and President Dmitry Medvedev to expand cooperation and finalize agreements.

Chavez, who has limited his public appearances after having a cancerous tumor removed in June, said that he received a religious icon from Sechin to help with his recovery.

--With assistance from Anna Shiryaevskaya in Moscow and Charlie Devereux and Corina Pons in Caracas. Editors: Torrey Clark, Richard Jarvie

To contact the reporter on this story: Daniel Cancel in New York at

To contact the editor responsible for this story: Dale Crofts at

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