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Xinyi Wu

A US-backed company’s takeover of Venezuelan oilfields, some of which were previously managed by Chinese firms, has dealt a blow to Beijing’s oil-backed loans and yuan trade networks, analysts say.
Through North American Blue Energy Partners (NABEP), a private company, the White House said the US had secured access to oilfields with 65 billion barrels of proven reserves in Venezuela – around one-fifth of the Latin American country’s total supply – including sites previously operated by Chinese firms.
“Oil development in Venezuela is effectively dominated by the United States,” said Cui Shoujun, a professor at Renmin University of China’s School of International Studies.
“[China’s] likelihood of recovering its debts has decreased,” he added.
Venezuela was the largest recipient of Chinese state-backed lending in Latin America, having borrowed more than US$100 billion since 2000, according to US research lab AidData. Most of these were structured as oil-backed loans, requiring shipments of crude to Chinese state buyers, with proceeds going into a Beijing-controlled account to service the debt.
While official data is patchy, and Beijing has largely frozen new lending in recent years, Venezuela’s outstanding debt to China is estimated at over US$10 billion.
The recovery of those payments now looks increasingly unlikely with the latest US-Venezuela oil deal, details of which were announced by the White House on Monday night, Washington time.
Venezuela is likely to be a cautionary tale about the risks involved in occupying ‘real estate’ that the Trump administration has set its sights on
Erica Downs, Centre on Global Energy Policy
The interim Venezuelan administration – formed after the US military ousted former president Nicolas Maduro in early January – granted NABEP 100-year concessions across 17 oilfields, several of which were run by Chinese and Russian firms.
The agreement gave the Pentagon a 35 per cent equity stake in NABEP’s parent company, while the US State Department gained the right to buy 20 per cent of produced crude at cost, along with a right of first refusal over all remaining production.
The deal was a “direct hit” to China’s non-dollar trade networks, said Dylan Loh, an associate professor at Singapore’s Nanyang Technological University.
“Replacing discounted Venezuelan crude forces Beijing onto open markets, while shifting oil sales back into US dollars stalls petroyuan momentum in Latin America,” Loh said.
Petroyuan refers to the settlement of oil transactions in the Chinese currency and independent Chinese refiners – known colloquially as teapots – have previously used non-dollar clearing channels to purchase US-sanctioned Venezuelan crude.
Deprived of one major source of heavy crude, teapots now face margin compression, Loh said.
Erica Downs, senior research scholar at Columbia University’s Centre on Global Energy Policy, similarly noted that the US takeover in Venezuela, as well as the war in Iran, have “generally been bad news for the teapots, which previously counted on discounted crudes from both countries along with Russia to boost their bottom lines”.
Among Chinese state-owned companies, China National Petroleum Corporation has the most at stake given its joint venture with Venezuelan energy giant PDVSA, which produces oil for debt-servicing, Downs added.


China’s foreign ministry responded to the takeover on Tuesday, saying the country’s rights and interests in Venezuela must be protected.
Venezuela holds the world’s largest proven reserves of oil, estimated at 303 billion barrels – or around 17 per cent of global reserves, according to the US Energy Information Administration.
About half of Venezuela’s total crude exports of 1.1 million barrels per day were sent to the United States in August, according to S&P Global, with the remaining bound for destinations such as India and the Caribbean. Meanwhile, China, previously the top buyer of Venezuelan crude, has taken no shipments in the past few months.
Loh noted that in addition to the United States securing additional crude supplies, the takeover “had the added effect of pushing Chinese and Russian influence out of the western hemisphere.”
Washington has framed the move as “reasserting the Monroe Doctrine”, a foreign policy position named after former president James Monroe that sought to establish US power across the Americas.
China is now likely to be more wary of investments in Latin America, said Cui of Renmin University.
Downs expected Chinese companies in energy, mining and infrastructure in particular to be more cautious in making deals in the region, especially in the short term.
“Venezuela is likely to be a cautionary tale about the risks involved in occupying ‘real estate’ that the Trump administration has set its sights on,” Downs said.


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Venezuela was the biggest recipient of China’s lending to Latin America, and Beijing is unlikely to recover debts, one analyst says


Venezuela was the biggest recipient of China’s lending to Latin America, and Beijing is unlikely to recover debts, one analyst says.


China dealt blow as US-backed firm takes over Venezuelan oilfields

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Venezuela was the biggest recipient of China’s lending to Latin America, and Beijing is unlikely to recover debts, one analyst says

Venezuela was the biggest recipient of China’s lending to Latin America, and Beijing is unlikely to recover debts, one analyst says