It was a match made in heaven.
In the first decade of the 21st century, as China’s economy grew at an unprecedented rate, it had an ever-growing need for energy to power its industries.
Meanwhile, Venezuela, flush with oil resources, needed hard cash as it tried to diversify its economy away from its dependence on the US.
In the coming years, as the former Venezuelan President Hugo Chavez nationalized the country’s oil industry, the US responded with economic sanctions, pushing Caracas further into Beijing’s lap.
China had other reasons to prop up the rabidly anti-American Venezuelan regime. Caracas offered China a sphere of influence right in the US’s backyard.
China has often complained about the US military bases in its backyard in South Korea, Japan, and the Philippines, and the US arms sales to Taiwan.
By propping up the Venezuelan regime, China sought to return the favor to the US by supporting an openly anti-American regime in an area traditionally considered a US sphere of influence.
China also supplied long-range radars to Caracas to monitor the US’s activities in the Caribbean Sea.
Besides, Venezuela is also rich in critical minerals. It has the largest gold deposits in Latin America. The country also has vast reserves of rough diamonds, iron ore, and bauxite, as well as other critical raw materials, including rare earths, coltan, nickel, copper, zinc, tin, tungsten, and titanium.
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Between 2005 and 2015, Venezuela opened its oil and critical mineral wealth to China, as Beijing provided Caracas with hundreds of billions of dollars in aid and loans to keep its faltering economy afloat.
China also invested billions in Venezuela’s mining industry and infrastructure projects under its ambitious ‘Belt and Road Initiative (BRI).’
According to AidData, a research lab at the College of William and Mary in the US, Venezuela owed over USD 105 billion to China around 2016, making it one of the largest debtors to Beijing.
Now, after the US military operation in Venezuela that led to the capture of its leader, Nicolas Maduro, this mutually beneficial relationship between China and Venezuela stands at a crossroads, with questions over whether Beijing will be able to get its huge investments back.
China’s USD 100 Billion At Stake In Venezuela
On January 3, just hours before the US launched its military operation in Venezuela, Maduro was hosting China’s Special Representative on Latin American Affairs, Qiu Xiaoqi.
The meeting between Maduro and Qiu Xiaoqi symbolized how deeply Beijing was invested in propping up the Venezuelan regime despite US sanctions, a faltering economy, and the lingering threat of a military intervention.
The relationship was mutually beneficial: China needed oil, critical minerals, and influence in America’s backyard, while Venezuela needed cash and Chinese weapons.
Indeed, Beijing was the biggest buyer of Venezuelan oil and its largest investor.
In 2008, China’s state-owned giant, China National Petroleum Corporation (CNPC), established a joint venture (PetroSinovensa) with Venezuela’s state-owned PDVSA to develop Venezuela’s extra-heavy crude. Most of this crude was shipped directly to China.
Over the years, China emerged as the largest buyer of Venezuelan oil.
Of the 900,000 barrels of oil Venezuela exported every day, 800,000 went to China, the Shanghai-based research firm Industrial Futures estimated in a report issued on January 4. It means that nearly 90% of Venezuela’s oil was sold to China.
In return, China invested billions of dollars in Venezuela’s mining sector, its infrastructure, and provided aid and loans.
For instance, Chinese companies are the dominant players in the Venezuelan telecommunications sector. Huawei Technologies secured its first major contract with the Venezuelan government as early as 2004, a USD 250 million deal to improve the country’s fibre optic infrastructure.
This fibre optic infrastructure is central to Venezuela’s 4G network.
Meanwhile, ZTE developed the Homeland Card, a national ID system that is key to Venezuelan citizens’ accessing the state subsidies.
Chinese firms also invested in projects for iron ore, bauxite, gold, and rare earths operated by the Corporacion Venezolana de Guayana, a state-owned Venezuelan metals conglomerate.
China also funded massive rail, road, and port projects in Venezuela under its ‘Belt and Road Initiative’.
China also provided Venezuela with weapons in return for oil.
According to AidData, by 2016, Venezuela owed China over USD 105 billion.
After the US imposed stricter sanctions on Venezuela in 2017, and oil prices crashed, it affected Caracas’s ability to repay China. Consequently, China stopped advancing new loans to Venezuela.
Beijing was also forced to restructure its loans to Venezuela as its economy began to falter under the pressure of US sanctions and crashing oil prices.
However, despite the US sanctions, some Chinese companies continued investing in Venezuela.
For instance, a private firm, China Concord Resources Corp, began developing two Venezuelan oilfields as part of a 20-year deal signed in 2024. With a planned investment of USD1 billion, the project aimed to produce 60,000 barrels per day by late 2026.
How US Takeover Of Venezuela Might Impact Chinese Investments
Over the years, Venezuela has repaid a considerable chunk of its loan to China.
However, according to various financial research firms, Caracas still owes China around USD 10-15 billion.
With the US takeover of Venezuela’s oil industry, China will no longer be the only destination for Venezuelan oil.
US President Donald Trump has made no secret of his desire to run the Venezuelan oil industry. However, the US is unlikely to support the confiscation of Chinese assets in Venezuela, as it will spook the investor sentiment.
Trump has also said that the US will open the Venezuelan oil industry to all countries, including the US adversaries, such as China.
So, while Venezuelan oil will continue to reach China, Beijing will definitely lose its preferential treatment and near monopoly in the country’s oil industry.
“They might allege that joint ventures between Venezuela and China, such as PetroSinovensa, are unconstitutional,” Cui Shoujun, director of the Centre for Latin American Studies at Renmin University, told the Hong Kong-based South China Morning Post.
This could lead to the revocation of preferential terms for Chinese companies, diluting Chinese equity or introducing American giants, such as oil major Chevron, as new controlling stakeholders, he added.
Furthermore, the new Venezuelan administration might review all deals signed under the Maduro administration.
Apart from the oil industry, the US will also open the mining sector in Venezuela for American companies. The US will undoubtedly aim to end Chinese domination in the critical minerals sector.
The US is already working on a plan to end its reliance on China for rare-earth magnet supply. For this purpose, the US has already signed agreements with Australia, Pakistan, Malaysia, and Thailand.
The US will undoubtedly try to reserve the Venezuelan mining sector for critical minerals exclusively for itself.
Further, analysts caution that the telecommunications sector is particularly vulnerable. Xu Tianchen, senior China economist at the Economist Intelligence Unit, noted how these Chinese investments may now raise national security concerns.
“Companies like Huawei and ZTE have been deeply embedded in Venezuela for years, and a pro-US government is likely to order the dismantling or banning of core communications equipment provided by Chinese firms,” Cui said.
Notably, Huawei has already been banned in the US, Canada, the UK, and many other Western countries over security concerns.
Apart from these economic setbacks, China is also set to lose its influence, built over two decades, right in the US backyard.
More worryingly, Venezuela might just be the beginning. Trump is also threatening intervention in Panama, Colombia, Cuba, and Mexico, and the Trump administration officials, including the Secretary of State Marco Rubio, are openly talking about reviving the two-century-old Monroe Doctrine, under which the US claims the first and exclusive right of influence in the Western Hemisphere.
If Trump implements these plans, China’s influence across Latin America might be under threat.
- Sumit Ahlawat has over a decade of experience in news media. He has worked with Press Trust of India, Times Now, Zee News, Economic Times, and Microsoft News. He holds a Master’s Degree in International Media and Modern History from the University of Sheffield, UK.
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- He can be reached at ahlawat.sumit85 (at) gmail.com
