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BARVIKHA, Russia (Reuters) - Venezuelan President Hugo Chavez cemented a closer alliance with Russia on Thursday, recognising two pro-Russian rebel regions of Georgia as independent and securing arms supplies and loans in return.
Chavez's move to recognise Abkhazia and South Ossetia is a rare diplomatic success for Russia, which has tried for over a year to persuade its allies to follow its lead and treat the two small regions as sovereign. Only Nicaragua had agreed so far.
"Venezuela from today is joining in the recognition of the independence of South Ossetia and Abkhazia," Chavez told President Dmitry Medvedev through a translator at the Russian leader's residence outside Moscow.
Caracas would start the process of establishing diplomatic relations with them soon, he added.
The rest of the world views the two regions, which threw off Georgian rule in the early 1990s and have run their own affairs since, as an integral part of Georgia. The issue has become a key sticking point in relations between the West and Russia.
President Dmitry Medvedev thanked Chavez, who is visiting Moscow, for his support. Shortly afterwards he said Russia would supply tanks and other weapons sought by Venezuela.
"We will supply Venezuela the weapons that Venezuela asks for," Medvedev said after their talks.
"Why not tanks? Without question, we have good tanks. If our friends want our tanks, we will deliver them."
No details were given of the arms deal but Russia's state RIA news agency quoted a military source as saying Venezuela would buy 100 tanks for $500 million (300 million pounds). The two sides also announced plans for a joint bank with capital of $4 billion to finance their projects.
Venezuela wants to beef up its weaponry to resist what Chavez terms U.S. imperialism in Latin America. Tension has also been rising with neighbouring Colombia, a close U.S. ally and historic rival of Venezuela.
Venezuela and Colombia came close to war last year and Colombian President Alvaro Uribe has accused Chavez of supporting FARC Marxist rebels fighting Bogota. Venezuela objects to Colombia allowing the United States to use its military bases for anti-drug operations.
Latin American diplomats in Moscow were concerned by the potential impact of the arms deal on regional security.
"If the tanks are something Russia is sending for immediate despatch, this will destabilise the region," one diplomat said. "If it is an order which has to be manufactured and delivered over coming years, then it is more of a political act."
The recognition of sovereignty is also controversial -- especially with South Ossetia because the small region is located close to the Georgian capital Tbilisi, has a population in the low tens of thousands and survives on Russian aid.
Generous Kremlin military and financial support for Abkhazia and South Ossetia has soured relations with Georgia and provoked Western condemnation. Tbilisi argues that Moscow's actions amount to a de facto annexation of the territories.
"This recognition -- bought by Russia with money and weapons -- bears no relation to the will of the Venezuelan people," Georgia's Foreign Ministry said in a statement.
"With this decision, the Venezuelan dictator legitimises the ethnic cleansing that took place," it said, referring to Tbilisi's claims that Russia turned a blind eye to armed militias it said looted Georgian villages in last year's war.
Russian commentators saw the move as a breakthrough for Moscow, which has so far failed to persuade any of its former Soviet allies to follow its lead on Abkhazia and South Ossetia.
"Russian diplomacy will interpret this as a big diplomatic victory," said Fyodor Lukyanov, editor of the magazine Russia in Global Affairs.
Chavez later held talks with powerful Russian Prime Minister Vladimir Putin who praised his decision on the recognition of Georgia's breakaway regions.
"Without any doubt, it confirms the independent nature of Venezuela's foreign policy," Putin said.
Venezuelan state oil company PDVSA and a consortium of Russian energy companies also signed an agreement to create a joint venture to develop a block in the Orinoco oil belt, Russian news agencies reported.
Venezuela says the Orinoco belt has the largest hydrocarbon reserves in the world, though the oil is extra heavy. Russia says PDVSA and the Russian consortium will need to jointly invest $30 billion in the Junin 6 oil field.
Cooperation between Russia, the world's No. 2 oil exporter, and OPEC member Venezuela has been dismissed by the United States as mostly talk but is watched with concern by Colombia.
Additional reporting by Conor Sweeney and Vladimir Soldatkin in Moscow and Margarita Antidze and Matt Robinson in Tbilisi, writing by Guy Faulconbridge and Michael Stott; Editing by Charles Dick