UPDATE 2-Brazil, Russia plan to boost trade, investment

Fri May 14, 2010 3:08pm EDT

Related Topics

* Two BRIC giants want to work on space, planes together

* Lula makes fourth visit to Moscow, Iran on agenda

* Lula says BRICS should trade in own currencies

* Brazil complains Russia not sharing military know-how

(Adds Lula comments on currencies, defence ministry complaints)

By Michael Stott and Fernando Exman

MOSCOW, May 14 (Reuters) - Brazilian President Luiz Inacio Lula da Silva called for closer business and investment ties with Russia on Friday, saying the two BRIC states should use their own currencies for trade, not the dollar.

"From 2002 to 2008, trade between Russia and Brazil grew five times," Lula said in a speech to a business forum during a visit to Russia.

"But that is not enough. We need to make a quantative leap ... and define new areas for partnership in areas like energy, infrastructure and space exploration."

Lula said a first step would be for Russia and Brazil to trade using their own currencies instead of dollars or euros.

"We can't...do business in another currency which we don't control and we don't produce," he said. "This is a challenge for Brazil and Russia, a challenge for Brazil and the BRICs and a challenge for the new commercial logic of the 21st century."

"There is no explanation for why we are doing business...using a third currency when we could strengthen our own currency."

Lula then met President Dmitry Medvedev at the Kremlin, their second meeting in less than a month, after Medvedev attended a summit of the BRIC nations -- Brazil, Russia, India and China -- in April in Brasilia.

Lula made his fourth visit to Moscow, an indication of the importance attached by both sides to developing new relationships that reflect the growing economic and political clout of the BRIC states.

After Moscow, Lula is heading to Tehran, making what Washington has termed "perhaps the last big shot" at persuading Iran to negotiate over its nuclear programme before new U.N. sanctions.

Brazil and Russia are both unenthusiastic about new sanctions against Iran until all other avenues for dialogue have been exhausted.

Brazil and Turkey, which hold rotating seats on the U.N. Security Council, have talked to Iran to try to revive a moribund agreement under which Tehran would send low-grade uranium abroad for processing and receive higher-grade uranium in return.

Lula and Medvedev were also to sign a strategic partnership agreement which will map out how their relations will develop, the Kremlin said.

The pact calls for increased cooperation on energy -- where Russia is offering Brazil nuclear power technology and gas liquefaction technology -- and in high-tech areas such as space exploration and aircraft building, officials on both sides said.

Russia's giant gas firm Gazprom (GAZP.MM) plans to open an office in Rio de Janeiro this year as part of these efforts, the Kremlin said.

At the same time, the development of military partnership is being hampered by the Russian government's unwillingness to accept any transfer of technology, said Brazilian Defence Minister Nelson Jobim, one of Lula's delegation on the trip.

Russia entered a Brazilian government tender for the purchase of 36 new fighters for the Brazilian Air Force but did not get into the shortlist.

"They did not qualify (for the tender) because of this (a lack of transfer of technology)," the Defence Minister said. Dassault's Rafale fighter, Boeing's F-18 and Saab's Gripen fighter are still in contention.

Russia and Brazil are both major commodity nations, with Russia among the world's top energy and metals producers and Brazil strong in exports of agricultural products, iron ore, cars and machinery.

Trade between the two BRIC giants grew to $6.8 billion in 2008 but fell back to $4.6 billion the following year because of the global financial crisis, the Kremlin said. Lula said he was confident Brazil-Russia trade could pass $10 billion this year.

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