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Damir Kaletovic

Damir Kaletovic

Damir Kaletovic is an award-winning investigative journalist, documentary filmmaker and expert on Southeastern Europe whose work appears on behalf of Oilprice.com and several other news…

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China’s Power Play To Get Its Hands On Foreign Oil

In accordance with the “new guidelines” for its economic development, China is trying to get back to the well-known “Silk Road,” a  $900 billion scheme of a “new era of globalization” that China is willing to undertake.  China’s goal is global expansion primarily in the economic field and strengthening of its economic influence. And while China is buying its way into key natural resource venues, the rest of the world is watching it in disbelief.

By signing contracts and extending loans in the oil arena, China is decisively crushing it when it comes to global influence, and once acquired, it may be an unstoppable force. With a uniquely deep wallet, China has and is willing to spend money in large quantities in order to acquire oil in far reaches of the world in developing countries in Europe, Asia, and Africa.

While Western countries stubbornly refuse to join China's vast new Silk Road project, one European country was willing to play ball. Italy resisted the warnings of its European and American allies, signing an agreement with China last Saturday becoming the first G7 member to take part in China's 'One Belt One Road' project, which makes enormous infrastructure investments to move Chinese goods and resources throughout Asia, Africa, and Europe.

China didn’t just limit its investments to these three continents. One of the latest Chinese investment took place in Cuba yesterday. Signing a Memorandum of understanding, China offered its help to reduce Cuba's dependence on energy imports, which made huge efforts to relaunch its oil projects, both in deep and shallow waters, with foreign capital. This Memorandum represents further deepening geological and oil links between these two countries in order to investigate minerals and create maps of the island to detect new oil fields and gas. Related: Russia Balks At Continued Oil Production Cut Alliance with OPEC

Director of Geology of the Cuban Ministry of Energy and Mines (MINEM), Enrique Castellanos, said that it is an important step since for more than 17 years, Chinese oil companies have been operating in Cuba and now these deals include projects with government entities.

In South Sudan, China showed it is willing to take a risk that other countries have shied away from. While other countries were sticking their noses up at South Sudan’s oil industry because of the corruption and civil conflict, China was all-too-happy to double down on its monopoly over South Sudan’s lucrative oil sector that is home to billions of barrels of oil—a monopoly which it had even before South Sudan’s independence.

Already deep in crisis, South Sudan was eager for China's help, which China was willing to give to this conflict-riddled country. But it pushed South Sudan into an even deeper crisis by taking loans from Chinese companies with hard-to-keep promises to pay back those loans with future oil revenues. Oil that for now still lies underground.

One of the biggest, but maybe not smartest, of China's decision making, was entering the market with the first in a series of oil contracts with Venezuela in 2007. China's desire to become the largest energy consumer found its realization in Venezuela, home of the world's largest oil reserves. The common interest which linked these two countries made these loans an ideal step for both at the time. Related: Oil Prices Fall As Trump Targets OPEC On Twitter

After more than $50 billion in loans, Venezuela is beholden to China and is struggling to repay the generous Asian nation with oil. Desperate for its oil, China continues to back Venezuela’s current Maduro regime, which is under serious threat from the United States and other European countries which have made a move to support Maduro’s opposition.

China and Russia have shown deep aspiration to take control of Venezuela’s oil, and according to the latest news from Caracas, they are on track to establish much more influence today than just, let’s say, two months ago. The stakes are big: Venezuela is one of the richest of the OPEC countries if we look oil potential.

While much of the world is taking sides with the United States in recognizing Guaido as interim president of Venezuela, China finds itself in the middle of South American country's political crisis, with billions in loans at stake.

China’s economy is now the second largest in the world. Their a nominal GDP over $10 trillion. That’s larger than Japan and Germany – the world’s third and fourth biggest economies – combined. It’s obvious that they have a clear goal, and on that road, they use any means to meet the goal.

By Damir Kaletovic for Oilprice.com

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  • Bill Simpson on March 29 2019 said:
    Venezuela is a long, long way from Russia and China. But it is a short flight, and three day voyage from the United States. Cuba too.
  • Bob Berke on March 29 2019 said:
    The author seems to buy the Trump’s regime change propaganda campaign for Venezuela by joining the China/Russia bashing game. The author claims that the China’s major Silk Road Project is only a cover to steal other countries energy resources. Yet China’s largest single project on the Silk Road is in Pakistan, not an energy producing country.

    Neither China nor Russia stole Venezuela’s oil, their loans to that country are being paid back through oil shipments. It’s a a very good way for Venezuela to pay off its loans since even at discounted prices, the oil is credited at prices well above production costs, i.e., in other words, Venezuela profits from the deal.

    Contrast that with the US position. What give the US the right to depose a sitting President and appoint his successor in a sovereign country? Or the right to hack into and place malware in Venezuela’s utility company computers to sabotage power production. If Trump wants to wage economic warfare against Venezuela, why was this issue not brought before the US Congress? Does the President now decide on his own to threaten any country.

    If so many countries agree with this, why has it not come before the UN? Isn’t this the same interfering in the political affairs of other countries, as seen in the Trump’s declaration that the Golan Heights belong to Israel, as if the US has the right to decide ownership of land anywhere in the world.

    This is just another in a long line of regime change interventions against a small nation that no American has reason to fear. And the reason, as Bolton has clearly stated, is the US wants to displace Russian and Chinese companies in Venezuela with American companies. When you have a high level official make these pronouncements, it can hardly be ignored as conspiracy theory.
  • Mamdouh Salameh on March 29 2019 said:
    Contrary to the author’s claim, China’s economy is the world’s largest at an estimated $27.5 trillion in 2019 compared to $21.5 trillion for the United States’ based on purchasing power parity (PPP) which both the International Monetary Fund (IMF) and the World Bank use as a measuring stick. Moreover, China’s economy is far more integrated in the global trade system than the United States’.

    And with its $900-billion ‘One Belt One Road’ initiative, China aims to expand its economy further and strengthen its economic influence globally. This needs a lot of energy particularly crude oil. In 2017 China overtook the United States to become the world’s largest importer of oil.

    For decades China has tried to secure energy and raw materials without confronting the United States and the West. China’s long-standing willingness to deal with states that the West regards pariahs is in part a practical and ideological refusal to make judgements about other countries’ domestic policy. It is also in part a recognition that dealing with Sudan, Angola, Iran or Uzbekistan allows China to avoid direct confrontation with Western interests. However, the larger China has become, the sheer scale of its energy needs has forced it more and more to intrude into areas that the United States regards as its own sphere of influence.

    Examples abound. China’s global oil and energy investments straddle the world from Venezuela to Iran, Angola, South Sudan, Iraq, Canada and now Cuba to name but a few.
    With US sanctions on Venezuela, China has become a lifeline for the country which sits on the world’s largest proven oil reserves estimated at 303 billion barrels. And with more than $50 bn in loans, Venezuela is beholden to China and also Russia for keeping its economy afloat. Desperate for its oil, China continues to back Venezuela’s current President Nicholas Maduro’s regime.

    By controlling Venezuela’s oil industry and reserves, China and Russia could be the omnipotent power in the global oil market.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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