Green Room

Venezuela: Chavez gives China control over oil

posted at 11:45 am on July 10, 2012 by

El Nuevo Herald reports that Hugo Chávez is ceding control over Venezuela’s oil to China, (link in Spanish) Hugo Chávez cede a China el control del petróleo.

The article states that El Nuevo Herald has obtained documents showing that Venezuela’s increasingly dependent on China’s financing and direct investments to the tune of US$80 billion. In exchange, China is playing a greater part on Venezuela’s strategic decision making regarding especially the oil-producing Orinoco area.

The documents obtained by El Nuevo Herald detail a series of negotiations earlier this year between the Venezuelan government, China International Trust and Investment Corporation (CITIC), and the Industrial and Commercial Bank of China Ltd. (ICBC) for 10% on Petropiar, a joint venture with assets previously expropriated from ConocoPhillips. ConocoPhillips is suing Venezuela in international courts for compensation over these assets.

According to the documents, the purpose of the venture is

“To create a joint venture in China for the special purpose of entering the Asian markets and obtain investments for the Orinoco oil belt.”

In the article, Evan Ellis of the Center for Hemispheric Defense Studies points out that, as this is clearly a risky venture, China is taking control of how the money will be spent, introducing review and monitoring mechanisms, and deciding how the revenues will be distributed and to what accounts.

Hence, what we’re seeing here is Chávez playing a game of 3-card monte: Stealing from ConocoPhillips, taking from the Chinese, and exchanging hard assets for entering the ever-risky Chinese stock market…with China in charge.

Related business news: China State Grid Signs Contract With Venezuela

State-owned China State Grid Corp., the country’s largest grid operator and power distributor, said it signed a $1.31 billion power-transmission agreement with Venezuela’s National Electric Corp.

The agreement, signed last week, would create the largest Chinese power-transmission project in Venezuela by value and is State Grid’s first overseas grid construction contract, it said on its website.

The contract includes building a power-transmission facility in Caracas and nearby regions that will significantly boost Venezuela’s transmission capacity, it said.

In other Chávez news, he’s declared himself cancer-free, again.

Cross-posted at Fausta’s blog. Please link to this post if you quote me.

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Consider that China has kept Venezuela afloat for a few years with loans. Also, consider that due the restrictions of the Panama Canal and distance, China will get a very steep discount for the crude.

This is definitely a geopolitical move in large due Keystone XL being blocked, as the type of crude (20 API gravity) it was to carry would replace that imported from Venezuela by a few Gulf Coast refineries which rely on heavy crude for their product stream.

Kermit on July 10, 2012 at 12:17 PM

This is so 100% what China does. Congratulations to Chavez: he’s now a petty African dictator.

J.E. Dyer on July 10, 2012 at 12:56 PM

I wonder how the people of Venezuela will react when Chinese men start coming over and marrying their women?
Seems like it won’t matter in the least what they think, there won’t be anything they can do about it, since Hugo is selling their country down the river in a desperate bid to maintain power, in spite of the failure of the economic model he has put into place.

KMC1 on July 10, 2012 at 3:44 PM

Is Hugo still alive? You know to the Chinese credit they probably would run the place better than Hugo has, although now that I think on it some more they probably would run California better than the Democrats have also.

William Eaton on July 11, 2012 at 12:08 AM