WASHINGTON (AP) — When it comes to claiming that Venezuela’s oil is now under his control, President Donald Trump is not mincing any words. But not a 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 coming 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 struck with Chinese President Xi Jinping late last year.
“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 doubts that Trump risks turning Venezuela into a “flashpoint that complicates the trade dynamics or Trump’s personal engagement with Xi.”
China is owed at least $10 billion by Venezuela, according to various estimates, a debt that former Venezuelan President Nicolás Maduro paid off by shipping oil to China. It is possible that the interim government of Venezuela that complies with the demands of Washington may question the legality of those loan agreements for oil and stop the 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 from investment bank Morgan Stanley.
American companies also have demands for tens of billions of dollars since Caracas nationalized the oil industry, and it is not clear how these IOUs will be honored and in what order.
The United States 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 United States would handle the sale of Venezuelan oil “indefinitely,” depositing the proceeds in US-controlled accounts that would ultimately “return to Venezuela for the benefit of the Venezuelan people.”
The administration said this week that the United States would kick off 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 US policy was to reduce “adversarial external influence” in the Western Hemisphere.
The US 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 purchases of US soybeans in the trade war with Washington. When Trump met with Xi in South Korea in October, the two men agreed to a one-year truce, backing away from high tariffs and export controls on each other.
China’s stake in Venezuela
Between 2000 and 2023, Venezuela was the fourth largest recipient of Beijing’s official credit, having received loans worth $106 billion from China’s official sector creditors, according to AidData, a research lab at the Virginia College of William & Mary that tracks Beijing’s foreign lending activities. But how much of the total that Caracas has paid 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 US sanctions on Venezuelan oil could have delayed loan repayments. The loan from China, under an unusual arrangement, was set up to be repaid with revenue from oil exports.
In China, Maduro’s capture has evoked memories of another leader who struck a deal with Chinese companies and then suddenly lost power: Libya’s Moammar Gadhafi.
After the fall of Gadhafi in 2011, Chinese businesses had to leave behind billions in investments. Cui Shoujun, a professor of international studies at Renmin University in Beijing, told Chinese news and commentary site guancha.cn that the transitional government in Caracas may consider the agreements under Maduro illegal and the debt with China illegal.
As in Libya, Beijing’s stake in Venezuela has gone beyond oil. Chinese firms have invested in telecommunications, railways and ports in Venezuela, all now at risk, according to a report by global financial firm Jefferies.
Still, the firm noted that Beijing would likely manage any disruption because Venezuelan oil accounted for only a small percentage of China’s oil imports and because Beijing has diversified its energy supplies and turned to electrification.
Hours before he was captured by US forces, Maduro welcomed a high-level Chinese diplomat to the presidential palace and praised the countries’ ties that had prospered since the time of his predecessor, Hugo Chávez, giving Beijing a strong position in America’s backyard.
Venezuela is the only Latin American country that has a high-level strategic partnership with China, as close friends as Pakistan, and Maduro’s ouster is expected to reduce China’s influence in the Western Hemisphere — in line with one of the goals outlined in the Trump administration’s National Security Strategy.
Beijing’s response to Maduro’s capture
Shortly after Maduro was captured, Beijing said it was “deeply shocked” by the brazen use of force by the United States against a sovereign state and action against its president and said it condemned “strongly” the actions of the United States. She called for the immediate release of Maduro and his wife.
The Spokesman of the Chinese Ministry of Commerce He Yadong said Thursday that no nation has the right to interfere in the economic and commercial 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 that Beijing does not exercise influence in the Western Hemisphere as announced.
“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.