Tag Archives: People’s Republic of China

Venezuelan state’s economic response to protests: Rationing plus Chinese and Russian loans to float a liberal dollar market

The anti-government protest in eastern Caracas 13 March ended in clashes with Venezuelan police BBC
The anti-government protest in eastern Caracas 13 March ended in clashes with Venezuelan police. Three more died in widespread protests. BBC

As protests continue against Venezuela’s faltering “oil revolution,” the political strategy of the chavista administration is striking for its intransigence. President Maduro has refused to recognize any grievances by students or other protesters. He calls protesters “fascists” and blames them for all the ills of the economy.  Protests are attacked by the national guard and often by state-organized paramilitary gangs on motorcycles who are praised by the president.

The administration’s strategy so far appears to be that protests will burn themselves out if they can be delegitimized and contained within middle-class areas.  Accordingly, the president’s rhetoric aims at inciting poorer citizens against protesters.  All in all, this is a risky strategy.  Protests have constantly intensified, with perhaps 25 persons dead now.
After a month of protests, the administration has taken urgent economic measures it hopes will undermine the protests and prevent their spread to poor and working-class barrios.
1. Ramirez announces Chinese and Russian loans and the launch of a very liberal Sicad 2
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As Chavez’ oil alliance with China gets serious, Beijing holds PDVSA to its word

Groundbreaking at CNPC refinery for PDVSA heavy oil, set tol be China's largest.

Groundbreaking, PetroChina-CNPC refinery for PDVSA heavy oil. It is to be China’s largest. (April 2012)

Over the past few weeks, I have been looking at the state of the Venezuelan-Chinese oil alliance that Hugo Chavez has so fervently championed.  The picture that emerges is not what one might expect. Here is an overview, in qualitative terms. [Correction: I originally wrote Ramirez reported that PDVSA produced “60,000” new barrels of Faja oil in 2013. He actually said “20,000”.]

A. Structural Changes – Vertical Integration with China

Till now, commentators have looked primarily at the obligations of the Bolivarian Republic of Venezuela (BRV) to send oil to China to repay Beijing’s huge loans.  However, there are major changes afoot in the structure of this relationship, no matter who succeeds Hugo Chavez.  Developments on the ground in both countries show an energy infrastructure buildup will soon bring significant cross-border vertical integration.  Soon, Venezuelan oil will not be shipped to China simply to fulfill financial-and-contractual obligations, but also for locked-in infrastructural reasons. 

All indications are that the Chinese side is actively fulfilling the obligations it entered into ca. five years ago (esp. December 2007) to build oil tankers, pipelines and refineries in China in order to import and process Venezuelan heavy crude.

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Part I: Venezuelan heavy oil: China’s persistence is finally paying off

In my travels and interviews in Venezuela this summer, it became clear that there has been a major advance in the relationship between China and the Bolivarian administration of President Chavez.  China’s dogged persistence and large state-sponsored investments in Venezuela – apparently the largest they’ve made to date in any country – are finally beginning to bear fruit.  The new Chinese influence is being simultaneously extended to both oil and non-oil sectors. 

Partly this development is due to the many crises affecting the Bolivarian state, and decisions it has been forced to take to make increasing national oil production a priority.  To advance this program, President Chavez’ administration has made initial moves to grant Beijing access to Venezuelan oil in major ways it had not previously. 

However, there are two sides to this story: on the other side, increasing Chinese participation is also a product of China having step-by-step put some quite sharp demands on PDVSA and the Venezuelan Bolivarian state for financial transparency and accountability, for geopolitical stabilization, and in particular, for Chinese firms being granted large-scale access to new heavy-oil fields in the Faja of the Orinoco River.  The key ingredient here is that Continue reading