Venezuela and Cuba agree oil link

Venezuela will supply 70,000 barrels of crude a day to the refinery

Venezuela and Cuba have formed a joint venture to revamp a Cuban oil refinery, tightening ties between the countries.

The two sides will pump an initial $800m to $1bn (£460m-£570m) into the scheme which aims to completely reactivate the Cienfuegos refinery.

Under the agreement Venezuela's state oil firm PDVSA will hold a 49% share in the plant and Cuba the rest.

Venezuela has also agreed to supply 70,000 barrels per day of unrefined oil to the factory in south central Cuba.

The deal marks the latest loosening of ties between the US and Venezuela, which have been strained under President Hugo Chavez.

Weaker US links

By boosting ties with communist Cuba - also a long time opponent of the US - Venezuela is hoping to reduce its traditional dependence on the US.

The Cienfuegos refinery was built with aid from the former Soviet regime - but work on the almost completed site halted in 1991 when the Soviet Union collapsed.

Meanwhile, Venezuela - currently the world's number five crude exporter - has been trying to tighten its grip on its oil industry in recent years to raise additional funds to fight poverty in the country.

Earlier this month, the country took over control of two oil fields operated by French firm Total and Italy's Eni after the pair failed to agree a deal that would have given the government a majority stake in new ventures.

As well as demanding firms give up majority control of their Venezuelan oil ventures, the government is also demanding firms pay more taxes.

Last month, BP was slapped with a back tax bill of $61.4m (£35m) covering 2001 to 2004.