China is lending its helping hand to Venezuela to stabilize the country’s oil sector, analysts told Sputnik, adding that Beijing’s economic activities in Latin America are apparently getting on Washington’s nerves.
China is about to breathe new life into Venezuela’s collapsing oil sector regardless of Washington’s displeasure: On July 4, 2018, Bloomberg reported that the China Development Bank is going to invest more than $250 million in the country’s crude production.
Liu Qian, analyst at the China Institute of Strategic Energy Studies, hailed Beijing’s move, stressing that Venezuela has long been one of China’s largest oil suppliers: “China’s direct investment of $250 million in Venezuelan national oil company [Petróleos de Venezuela, S.A.] will positively affect the stabilization of oil production in Venezuela and ensure delivery of crude oil to China,” he told Sputnik China.
However, according to Liu, Venezuelan economic difficulties could hardly be resolved by a one-time financial injection: “China does not exclude the provision of loans or other types of assistance to stabilize and boost oil production [in Venezuela] within the framework of a ‘loan-for-oil’ model of energy cooperation,” he highlighted.
The Chinese analyst underscored that the ongoing economic crisis in the Latin American country and the subsequent slump in oil production had affected the global energy market. Hence, the revival of the country’s energy industry might stabilize crude output, bring more oil to the market and thus prevent global oil supply shortages, he suggested.
China’s Economic Expansion in US’ ‘Backyard’
Washington is keeping a wary eye on China’s activities in Latin America, which the US has long seen as its “backyard,” with Venezuela being the White House’s major irritant.
“As usual, the US reacts very painfully to the fact that China is conducting nothing short of economic expansion in Latin America,” Vladimir Sudarev, professor at Moscow State Institute of International Relations (MGIMO) and expert on Latin America opined. “They throw a scare into Latin American countries saying that while their cooperation with China is profitable today, the day after tomorrow they will be completely dependent on China.”
However, neither Latin American states, nor China are falling for Washington’s gloomy prognoses, the Russian academic remarked.
While the US is taking measures to isolate Venezuela, China is not following suit, boosting its ties with the Caribbean country. In December 2017, Beijing invited Venezuelan Foreign Minister Jorge Arreas on an official visit. Furthermore, Finance Minister Simon Zerpa, who has recently held a meeting with officials from the China Development Bank and China National Petroleum Corporation, was subjected to US sanctions.
US President Donald Trump has repeatedly made tough statements against the Venezuelan government. He even went so far as to discuss a potential invasion of the Latin American country and the removal of President Nicholas Maduro with his aides.
Commenting on the Chinese initiative, Sudarev cast doubt on the assumption that China was seeking to support the Maduro government through the massive investment in the country’s oil sector.
“They have been investing [in Venezuela] for a long time, and, of course, in a certain sense they are interested in supporting a bankrupt Venezuelan state [oil] company so that it could regularly supply crude to China. They are being guided by pragmatic interests and not [the desire] to support the government of Nicholas Maduro,” he opined.
Sudarev envisioned that it will take time for Petróleos de Venezuela, S.A. (PDVSA) to regain its footing. According to the academic, it is unlikely that the company will manage to immediately absorb the Chinese multi-million loan and begin production at the levels it did 10 years ago. Moreover, he did not rule out that China’s investments in the Venezuelan oil sector could result in financial losses.
According to the International Energy Agency, in June 2018, Venezuelan oil production fell to 1.36 million barrels per day. For comparison’s sake, in 2013 the country’s output amounted to 2.9 million barrels a day. Now Maduro is promising to increase the daily crude output by 1 million barrels, while his critics are predicting a drop in production to 1 million barrel per day.
It is expected that the oil loan and another financial agreements will be officially inked by Beijing and Caracas in the coming weeks.
The views and opinions expressed by the contributors do not necessarily reflect those of Sputnik.