WASHINGTON – When it comes to claiming that Venezuelan oil is now under his control, President Donald Trump is mincing no words. But no small part of that oil belongs to China under contracts it struck with Caracas years ago, setting the stage for a delicate diplomatic dance in the next few weeks.
Some experts expect Trump to work with China in an effort to stabilize trade relations. After all, Trump is expected to visit Beijing in April as part of an effort to protect the fragile trade truce he reached with Chinese President Xi Jinping late last year.
Recommended Videos
“The administration appears focused on avoiding unnecessary escalation or new irritants with Beijing while keeping leverage firmly on Washington’s terms,” said Craig Singleton, senior director of the China program at the think tank Foundation for Defense of Democracies.
He added that he doubted Trump would risk turning Venezuela into a “flashpoint that complicates trade dynamics or Trump’s personal engagement with Xi.”
China is owed at least $10 billion from Venezuela, according to various estimates, a debt that former Venezuelan President Nicolás Maduro had paid down by shipping oil to China. It is possible that the interim Venezuelan government complying with Washington’s demands could question the legality of those loans-for-oil deals and cease payments.
Two major Chinese state-owned enterprises — China National Petroleum Corp. and Sinopec — are entitled to 4.4 billion barrels of oil reserves in Venezuela, the highest for any foreign country, according to a research note by the investment bank Morgan Stanley.
U.S. companies also have claims for tens of billions of dollars from when Caracas nationalized the oil industry, and it’s not clear how these IOUs will be honored and in what order.
The U.S. seized two sanctioned oil tankers this week as part of a plan to assert control over Venezuelan oil shipments. Energy Secretary Chris Wright said the U.S. will handle the sales of Venezuela’s oil “indefinitely,” depositing proceeds into U.S.-controlled accounts that will ultimately “flow back into Venezuela to benefit the Venezuelan people.”
The administration said this week that the U.S. would kickstart those sales with 30 million to 50 million barrels taken from the South American country’s crude storage facilities. Asked for more detail, a Trump administration official not authorized to comment publicly and speaking on condition of anonymity said U.S. policy was to wind down “adversarial outside influence” in the Western Hemisphere.
The U.S. using such leverage over a crucial natural resource comes after Beijing flexed its muscles last year by choking off critical supplies of rare-earth magnets and weaponizing its purchase of American soybeans in the trade war with Washington. When Trump met Xi in South Korea in October, the two men agreed to a one-year truce, backing off from sky-high tariffs and export controls on each other.
China's stakes in Venezuela
Between 2000 and 2023, Venezuela was the fourth-largest recipient of Beijing's official credit, having received $106 billion worth of loans from China’s official-sector creditors, according to AidData, a research lab at Virginia's College of William & Mary that tracks Beijing's overseas lending activities. But how much of the total that Caracas has paid off and what is still owed is unclear, said AidData executive director Brad Parks, because Caracas stopped reporting debt details several years ago.
While some estimates put the outstanding debt at $10 billion, Parks said the figure could be much higher because U.S. sanctions on Venezuelan oil might have delayed loan repayments. The loans from China, under an unusual arrangement, were set up to be paid down with proceeds from oil exports.
In China, the capture of Maduro evoked memories of another leader who had struck deals with Chinese companies and then suddenly lost power: Libya's Moammar Gadhafi.
After the 2011 fall of Gadhafi, Chinese businesses had to leave behind billions in investments. Cui Shoujun, professor of international studies at Renmin University in Beijing, told the Chinese news and commentary site guancha.cn that the transition government in Caracas could deem agreements under Maduro unlawful and the debt to China illegal.
As in Libya, Beijing’s stakes in Venezuela have gone beyond oil. Chinese firms have invested in telecommunications, railways and ports in Venezuela, all now at risk, according to a report by the global financial firm Jefferies.
Still, the firm noted that Beijing will likely manage any disruption because Venezuelan oil counted for only a small percentage of China's oil imports and because Beijing has diversified its energy supplies and pivoted to electrification.
Hours before he was captured by U.S. forces, Maduro hosted a high-level Chinese diplomat at the presidential palace and praised the countries' ties that had prospered from the days of his predecessor, Hugo Chávez, and given Beijing a strong foothold in America's backyard.
Venezuela is the only Latin American country that has a high-level strategic partnership with China, on par with close friends like Pakistan, and the ouster of Maduro is expected to curtail China's influence in the Western Hemisphere — in line with one of the goals spelled out in the Trump administration's National Security Strategy.
Beijing's response to the capture of Maduro
Soon after Maduro was captured, Beijing said it was “deeply shocked” by the blatant use of U.S. force against a sovereign state and action against its president and said it “strongly” condemned the U.S. actions. It called for the immediate release of Maduro and his wife.
Chinese Ministry of Commerce spokesperson He Yadong said Thursday that no nation has the right to interfere with economic and trade cooperation between China and Venezuela, which he said is between two sovereign states and protected by international and domestic laws.
“No matter how the political situation in Venezuela evolves, China’s willingness to deepen bilateral economic and trade cooperation will not change,” He said.
Singleton said Beijing does not wield the clout in the Western Hemisphere as touted.
“Beijing can protest diplomatically,” he said, “but it cannot protect partners or assets once Washington decides to apply direct pressure.”
___
Condon reported from New York.