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Pragmatism over Ideology
China's Relations with Venezuela
William Ratliff, The Jamestown Foundation, China Brief
5/21/2006

The incessant barrage of threats and counter-threats hurtling between Washington and Caracas is the background, sometimes the foreground, of Sino-Venezuelan relations. Simply put, if U.S. ties to Venezuela were friendly, Beijing would have little to do in this oil-rich state that exports 60 percent of its output to its northern neighbor. Yet, Washington has been suspicious of Hugo Chavez since his election as president during the Clinton administration and relations have nosedived under the current presidency of George W. Bush. U.S. Secretary of State Condoleezza Rice called in mid-February for an “inoculation” strategy to neutralize Chavez (Reuters, Feb. 17). Meanwhile, Chavez insists that the U.S. plans to invade Venezuela and uses his enormous oil slush fund to press for Latin independence from Washington. Enter China, searching for oil.

In a search for energy supplies, China has sent political leaders, technicians and investments all over the world in recent years, finally even to Latin America. In this region, which has about 10% of the world’s estimated oil reserves, Venezuela is the land of plenty with about two-thirds of Latin America’s total, according to reports from the U.S. Energy Information Administration. Venezuela is the world’s fifth largest oil exporter. Yet while China wants some of that oil, the critical question will be, as Venezuelan analyst Elizabeth Burgos put it in a personal interview, “whether China is willing to run the risk of a confrontation with the United States over a country without much importance except oil.”

Chavez does not seem to grasp Beijing’s concern here and has repeatedly tried to pull China in on his side in disputes with Washington. For example, he has condemned Washington’s refusal to supply spare parts for Venezuela’s aging F-16s and for blocking his efforts to purchase aircraft from Spain and Brazil on the grounds of U.S.-licensed components used by the Spanish and Brazilian companies. “The gringos are sabotaging and they are impeding,” Chavez said in a speech in mid-January (AP, Jan. 18). “Well, it doesn’t matter. We will buy [the planes] from China [or] Russia.” Several weeks later he told supporters: “We could easily sell [our] oil to real friends and allies like China, India or Europe” (AP, Feb. 6).

In mid-2005 the Chinese ambassador in Caracas tried to put a brake on Chavez’s rhetoric in a long interview (El Universal, Aug. 28 and 29, 2005). He understood Venezuela’s wish to diversify its clients, but added that “the natural markets for Venezuelan oil are North and South America.” He conceded that China was cooperating with the Venezuelan government in the expectation of securing access to some of the oil for itself. Yet his blunt comments suggested two things: that China still is not convinced Venezuelans are serious and committed enough to pull off the production projects, and that China’s interest is strictly commercial. That is, China will not allow Chavez to make China his ally in battles with Washington.

Underlying the tensions between Chavez and China are differing interests. Importantly, both reject a “uni-polar” world dominated by Washington. China’s main goal since the late 1970s, however, has been domestic development. Foreign relations are intended to advance—or at least not hinder—that objective. A government adviser from the Institute of International Strategy in Beijing recently emphasized in an interview that China does not want unrest in the Americas. Such a scenario, or rocky bilateral relations with Washington, might threaten energy and other deliveries to China and thus impede the country’s domestic growth.

Chavez, however, is a revolutionary firebrand who quotes Mao Zedong and urges major change. He is one of the most colorful caudillos ever in a hemisphere long famous for its strong and resourceful—rather than brilliant and progressive—leaders. He thrives today because he has made himself the chief spokesman for this decade’s wave of Latin "anti-Americanism" and because Venezuela is now awash in oil money that he spends freely on programs to aid and court the poor and the powerful abroad, something that is increasingly resented by many of the poor at home. Latin America is as always ripe for such messages because the region’s governments seldom tangibly serve the interests of their people (Hoover Digest, 2005, No. 3). Also, the United States is sometimes rightly, but often demagogically (in the spirit of traditional Latin scapegoating) linked to those governments and other policy failures.

Chavez wants to develop a kind of “privileged relationship” with China that has a “strong ideological accent,” according to former Venezuelan UN Ambassador (2001-2004) Milos Alcalay in an interview with the author. In contrast, Alcalay notes, China seeks practical and non-ideological commercial ties. Already and increasingly, Beijing is and will find dealing with Venezuela a challenge to its proverbial patience as well as an escalating irritation to Washington.

Chavez seeks a special relationship so that China can replace the United States as Venezuela’s chief foreign client, Burgos adds, enabling him to toss the U.S. out of Venezuela in the context of his continent-wide “Bolivarian revolution.” At present, the United States imports about 15% of its foreign oil from Venezuela. Late in 2005, Chavez noted that so long as the United States does not try to invade Venezuela and overthrow him, oil will continue to flow north (ABC Nightline, September 16). In the end, however, this self-styled successor to Fidel Castro seems to think Venezuela must break all economic dependence on the United States, and even a Fudan (Shanghai) University specialist sees Chavez using oil as “a diplomatic weapon” (China Daily, Nov. 22). In early February 2006 Rafael Ramirez, the president of Venezuela’s state-run oil company Petroleos de Venezuela (PDVSA), reviewed Venezuela’s oil-related relations with China in a Caracas interview, saying “we are hoping to send 300,000 bpd to [China] very soon” (Xinhua, Feb. 9). This would be double the current amount, most of which goes into asphalt. (Much of what China buys now is orimulsion, a low-grade, dirty fuel oil made by PDVSA from the heavy oil of the Orinoco Tarbelt.) Venezuela’s ultimate goal is to provide 15-20% of China’s oil import needs. Much of that might have to come from what the United States now receives, for Chinese and foreign sources fear that production is falling, not rising, in Venezuela.

Ambassador Alcalay warns, however, that selling to China rather than the United States is “neither sensible nor realistic,” as China’s ambassador himself suggested, for several reasons. China has no refineries that can handle the heavy, highly sulfurous Venezuelan crude, while Venezuela already has its own in the United States that do—the Citgo group. Still more problematic is the long and torturous transportation route around southern Africa and through the dangerous Malacca Strait. The Panama Canal is near Venezuela, but it is too narrow for the Very Large Crude Carriers that transport so much crude today. PDVSA has opened an office in Cuba, as it has in Beijing, and plans to build a super-tanker shipping terminal at Matanzas, east of Havana. Venezuela says it will increase its number of tankers from 21 to 58 over the next seven years with a ship-building program in cooperation with China, while China could provide some ships of its own (AP, August 20, 2005). Another option is pipelines. Colombian President Alvaro Uribe and Chavez have already agreed to construct one to a Colombian Pacific port. This route will greatly facilitate transporting oil to China, though Beijing does not seem to be involved in the project.

China is taking an increasingly active role in Venezuelan fields themselves. Extra-heavy oil blocks in the Orinoco tarbelt have been reserved for the China National Petroleum Corporation (CNPC), which has agreed to join PDVSA in developing hydrocarbons found in eastern Venezuela’s Zumano region (International Petroleum Finance, September 9, 2005; Petroleum Economist, March 7).

Ultimately, China’s ties to Venezuela must be seen in the context of Beijing’s accelerated cultivation of countries throughout the Western Hemisphere. For example, pledges of hundreds of millions of dollars in investments in Venezuela are dwarfed by Hu Jintao’s 2004 pledges of more than $30 billion to Argentina and Brazil alone over ten years. China is providing some technological equipment to Venezuela, including a communications satellite to be launched in 2008, some computer technology and three JYL-1 mobile air-defense radar systems (Washington Times, November 20, 2005). Yet there is no evident master-plan here promoted by China. As Ambassador Alcalay says, circumstances are “not favorable for a strong military and intelligence link.” Chavez buys most of his arms from Russia and other military and high-tech goods from anyone who will sell. When it comes to defense matters, he is pragmatic.

In the end, China’s relations with Venezuela are practical and opportunistic. Beijing wants oil, but is still far from sure that it will pan out, in large part because of the personality, objectives and actions of Chavez himself. Moreover, Beijing does not want a fight with Washington. It is conceivable that as investments rise, the Chinese will become increasingly intolerant of ideology if it reduces competence and efficiency, which it so often does. They may stamp their feet in frustration, at least as much as Americans have done before them. Indeed, before too long Chavez may find that he has replaced “Ugly Americans” with “Ugly Chinese.”

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