China’s
Oil Diplomacy
By John Chan
06 September 2006
World Socialist Web
The
state visit of Venezuelan President Hugo Chavez to Beijing in late August
highlighted China’s expanding relations in Latin America, which
are heightening tensions with the US.
For Chavez, closer ties with
China are a counterweight against the open hostility of Washington.
Venezuela is to expand oil exports to supply China’s rapidly growing
energy needs in return for political backing and economic aid.
“China is one of the
world’s largest consumers [of oil] and Venezuela is one of the
biggest [oil] producers, so we complement each other completely,”
Chavez declared on arrival in Beijing. He called for a “strategic
alliance” with China to foster a “multi-polar” world
and to challenge the “hegemony” of the United States.
Washington has sought to
oust the Venezuelan leader several times since he came to power in 1999.
In turn, Chavez has cultivated ties with other major powers, encouraging
a number of Latin American countries to take the same step, thus undermining
US control over its “backyard”.
Although they no doubt agreed
with Chavez’s call for challenging US hegemony, the Beijing leaders
made no public statement on his remarks in order to avoid straining
relations with Washington. Nevertheless, China signed deals that affect
US strategic and economic interests.
In Beijing’s Great
Hall of the People, Chavez promised to increase oil exports to China
from the current level of 155,000 barrels per day to 500,000 by 2009
and 1 million by 2012. In return, Chinese President Hu Jintao agreed
to support Venezuela’s campaign for a two-year seat in the UN
Security Council and to provide substantial economic aid, including
a fibre-optic communication network and finance for a $1.2 billion project
to build 20,000 houses.
Chinese state oil companies
are cooperating with their Venezuelan counterparts on a project in the
Orinoco River basin and offshore exploration. China has also sold oil
tankers and drilling rigs to Venezuela and is preparing the launch of
a satellite for Caracas in 2008.
On August 28, Venezuelan
Energy Minister Rafael Ramirez announced that Chinese state-owned oil
companies would invest around $5 billion in energy projects in Venezuela
by 2012, lessening the country’s dependence on oil exports to
the US. He said the investment would help increase production to 5.8
million barrels per day by 2012.
Venezuela’s existing
oil output is 3.3 million barrels per day—the fifth largest in
the world. It is the fourth largest oil supplier to the US after Canada,
Mexico and Saudi Arabia. China’s emergence in recent years as
the world’s second largest consumer of oil puts it in direct competition
with the US for global energy resources.
The US-based thinktank Stratfor
pointed out on August 25 that Venezuela-China oil cooperation posed
huge unresolved problems. First, Venezuela’s distance from China
meant high shipping costs and left shipments “vulnerable to US
interdiction anywhere along the way”. Secondly, Venezuela’s
oil is heavy and sour, and thus unsuitable for most Chinese refineries
without major technical upgrades.
Stratfor concluded that Beijing’s
orientation to Venezuela was driven by long-term strategic considerations.
“Chinese leaders are well aware that, as the years grind on, heavier
and sourer oil will become more prevalent in the global crude stream...
Despite years of creeping degradation, Venezuela still commands the
technology to process such materials, and China knows full well that
it will need precisely those skills—particularly if China is to
ultimately develop reserves of heavy oil just off the mainland’s
shore.”
It is evident to Beijing
that the US invasions of Iraq and Afghanistan, as well as threats against
Iran, are aimed at controlling the huge strategic oil and gas reserves
in the Middle East and Central Asia. As a result, China along with the
European powers, Japan and India are being driven to look elsewhere
for energy sources.
China currently imports 2.3
million barrels of crude oil a day, mainly from Angola, Saudi Arabia,
Iran and Russia. Venezuela’s commitment to boost exports to China
gives Beijing another option. Significantly, Angola surpassed Saudi
Arabia in February as China’s top oil supplier. Beijing’s
approach to Venezuela is similar to other countries in Latin America,
Africa, Central Asia and the Middle East: to offer aid and infrastructure
projects in exchange for oil, minerals and other raw materials.
A Los Angeles Times article
on August 29 pointed out China has huge energy interests in Latin America.
China is planning to invest $8 billion to build a railway in Argentina
and acquire a stake in oil and gas firm Pluspetrol. China has signed
energy and transport agreements worth $10 billion with Brazil, covering
projects that include a gas pipeline, power plants and a trans-Amazon
road linking Sao Paulo to Lima. In Bolivia, Beijing plans to invest
$1.5 billion in the state-run oil and gas company YPF Boliviano. In
Ecuador, China has purchased $1.4 billion in assets from a Canadian
oil company operating two major oil pipelines.
Close relations with Venezuela
will intensify US-China tensions throughout Latin America. A series
of “left” nationalist leaders such as Evo Morales in Bolivia
or Chavez in Venezuela have emerged in the region in response to a deepening
social crisis at home and an ability to manoeuvre with Washington’s
Asian and European rivals to obtain a degree of economic and political
autonomy from the US.
These relations are reflected
in Chavez’s anti-American rhetoric. After securing China’s
support for his UN Security Council bid, Chavez told reporters in Beijing:
“The US government has employed every means to block my country
from joining the Security Council. The American imperialists are trying
to stop us.”
China’s foreign policy
is not “anti-imperialist”, but rather represents the efforts
of the emerging Chinese capitalist class to protect their national interests.
To strengthen its own hand in the UN Security Council, Beijing is backing
Venezuela against Washington’s favoured candidate, Guatemala,
for the rotating Latin American seat. Washington has openly declared
that Venezuela would be a “non-consensus-building” member
in the Security Council, likening it to the “rogue regimes”
of Iran and Cuba.
As for Chavez, his left posturing
is aimed at obscuring the anti-working class content of his policies
at home, while at the same time complementing his search for alliances
in the Middle East, Asia and Europe. While in China, he proclaimed himself
an admirer of Mao Zedong, declaring: “One of the greatest events
of the 20th century was the Chinese revolution.”
Jocelyn Henriquez, a former
Venezuelan ambassador to Beijing, told the Financial Times on August
24 that Chavez was observing the world’s fast growing economy
for the clues about economic development in his own country. “Chavez
is always talking of his own Great Leap Forward, so he would be better
off examining how China is developing its own economy,” she said.
Chavez has no interest in
Mao’s peasant radicalism or his so-called Great Leap Forward in
the 1950s, which was an economic catastrophe. He does, however, have
a lot in common with Mao’s heirs, who have openly embraced the
capitalist market and transformed China into the world’s largest
sweatshop.
Chavez’s so-called
“socialism” bears remarkable similarities to that of Beijing’s
“communist” leaders, who are guided by the notorious slogan,
“to get rich is glorious”. A Financial Times article on
August 16, entitled “Bankers get rich from Chavez’s revolution”,
declared: “[T]he ‘revolutionary’ distribution of oil
money has spawned wealthy individuals who are increasingly making Caracas
a magnet for Swiss and other international bankers. And it is not just
private bankers who are banking on the revolution.”