MOSCOW -- Russia yesterday announced ambitious plans to enhance its armed forces and nuclear arsenal while extending a $1 billion loan to Venezuela to purchase arms and exploring the possibility of forming a gas cartel with the Latin American nation.

Speaking during a meeting with commanders following military exercises in southern Russia, President Dmitry Medvedev cited the nation's recent war with Georgia in calling for an urgent drive to upgrade Russian military capabilities within 12 years, including the country's ability to deter nuclear attacks.

Mr. Medvedev pledged to improve pay for soldiers, mass-produce nuclear submarines carrying cruise missiles and build "an air- and space-defense system," according to a statement released by the Kremlin. "The developments in South Ossetia made the acuteness of these issues more apparent," he said, referring to the breakaway Georgian region at the center of last month's war.

The Russian government had previously announced plans to boost military spending 26 percent next year, to a new high in the post-Soviet era.

Earlier in the day, Mr. Medvedev met with visiting Venezuelan President Hugo Chavez and announced agreements intended to boost energy cooperation between the two nations, both of which have significant oil and gas reserves and have sought to challenge U.S. influence in the world.

Mr. Medvedev and Mr. Chavez discussed the possibility of establishing a cartel, the Interfax news agency reported, but analysts said neither nation had the resources or technology needed to dominate global markets.

In a separate statement, the Kremlin also disclosed plans to lend $1 billion to Venezuela for the purchase of Russian arms. The state-run news agency RIA Novosti reported that talks were under way on the sale to Venezuela of antiaircraft systems and armored personnel carriers.

Since 2005, Venezuela has signed contracts to buy more than $4.4 billion worth of arms from Russia, including fighter jets, helicopters and assault rifles, according to the Kremlin. The arms sales have caused alarm in the United States and Colombia, which has accused neighboring Venezuela of supporting leftist insurgents.

The visit to Russia by Mr. Chavez, his second in two months, comes shortly after two Russian bombers made a brief training visit to Venezuela and as Russian warships are sailing to the Caribbean Sea for joint exercises with the Venezuelan navy.

Secretary of State Condoleezza Rice ridiculed the exercises as an outdated attempt by the Kremlin to assert its military power that only highlighted Russia's increasing isolation in the international community.

The United States and the European Union have condemned Russia's invasion of Georgia and said its recognition of South Ossetia and another separatist enclave, Abkhazia, as independent states represented an attempt to redraw international borders by military force. Russia has vigorously defended its actions, saying it attacked Georgia only after a Georgian offensive against South Ossetia that left Russian peacekeepers dead and amounted to "genocide" against residents.

Since the start of the U.S. financial crisis, however, Mr. Medvedev and Prime Minister Vladimir Putin have sought to soothe fears of investors who fled the Russian economy. Nearly $57 billion was withdrawn from Russia between Aug. 8, the day after the war began, and Sept. 19, according to an analysis by the BNP Paribas bank. Meanwhile, the Russian stock market is down more than 40 percent for the year.