Venezuela's Maduro Seeks to Renew Beijing Ties Amid China-West Tensions

(Reuters) — Venezuela's President Nicolas Maduro arrived in China on Friday, his first visit in five years, to renew engagement between the two countries as China's ties sour with the West and the South American country seeks fresh financing.

China, the world's largest oil importer, is Venezuela's largest creditor and a key customer and player in the OPEC member's energy industry, which has the world's largest proven crude reserves.

Energy trade, debt repayment and new financing likely are the main focus of the Sept. 8-14 visit, officials and sources said. Venezuela owes over $10 billion to China, according to independent data.

Since the U.S. imposed oil sanctions on Venezuela in 2019, Caracas' debt repayment to China has slowed and state oil company PDVSA is no longer shipping crude directly to its Chinese partners, state-owned China National Petroleum Corp. and PetroChina.

Maduro's arrival follows meetings between a Venezuelan delegation, including the vice president and oil minister, and Chinese officials including Vice President Han Zheng and Foreign Minister Wang Yi in Beijing and Shanghai earlier this week, according to China's foreign ministry.

The two countries "closely coordinate and cooperate in international and regional affairs, firmly support each other, and jointly oppose hegemonism and unilateralism," Han told the Venezuelan delegation, according to a report from Chinese state media outlet CCTV on Friday.

Venezuelan Oil Minister Pedro Tellechea said in a post on X on Friday that the Venezuelan delegation met executives from the Shanghai International Energy Exchange and the Shanghai Petroleum and Natural Gas Exchange.

China wants to use the Shanghai exchanges for yuan energy deals with oil producers. "They are key for energy trade and contract formulation for futures in Asia," Tellechea said.

Beijing's decision to host Maduro coincides with a G20 summit in New Delhi this weekend, which Chinese President Xi Jinping will not attend. Maduro last visited China in 2018, when he met with Xi.

Oil and Debt

Venezuela remains heavily indebted to China following $50 billion granted through credit lines and oil-for-loan deals dating back to 2007 under the late President Hugo Chavez's administration.

A rout in oil prices and falling output at Venezuelan fields meant that the cash-strapped government was forced to ask for grace periods on debt owed to China in 2016.

In 2020, the Maduro administration and Chinese banks again agreed to a grace period on some $19 billion of Chinese debt, according to Reuters reporting.

Maduro's officials are now in talks with China for debt repayment and a fresh credit line for infrastructure projects to be built by Chinese firms in Venezuela, sources with knowledge of the negotiations said.

Previous attempts to get financing from China have failed over Venezuela's repayment capacity. But since U.S. President Joe Biden's administration has eased some sanctions on Venezuela and could continue to do so if Maduro agrees to a presidential election, PDVSA is working to boost proceeds from oil exports.

Despite sanctions on Venezuela, China imported around 390,000 barrels per day of crude from the country between January and August this year, totaling roughly 12.9 million metric tons, data from commodities consultancy Vortexa showed.

Most Venezuelan cargoes are transferred via third countries such as Malaysia. China reported no direct crude imports from Venezuela in official customs data last year or thus far this year, but Venezuelan officials have said they want to cut middlemen to China.

CNPC holds a 40% stake in the Petrolera Sinovensa project in the vast Orinoco Belt alongside PDVSA. CNPC stopped lifting Venezuelan oil in mid-2019 after former U.S. President Donald Trump tightened sanctions against the South American exporter, though other Chinese entities have continued to make shipments.

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