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John Daly

John Daly

Dr. John C.K. Daly is the chief analyst for Oilprice.com, Dr. Daly received his Ph.D. in 1986 from the School of Slavonic and East European…

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Venezuela Ramps up China Oil Exports Unsettling Washington

Venezuela Ramps up China Oil Exports Unsettling Washington

The biggest geostrategic change of the past decade overlooked by Washington policy wonks in their fixation on their self-proclaimed “war on terror” is that Latin America has been throwing off the shackles of the Monroe Doctrine.

These ignored developments may well soon refocus Washington’s attention on the Southern Hemisphere, as Venezuela’s President Hugo Chavez reorients his country’s to China.

It is not an inconsiderable element of concern for the Obama administration. According to the U.S. Energy Administration, the United States total crude oil imports now average 9.033 million barrels per day, with the top five exporting countries being Canada (2.666 mbpd), Mexico (1.319 mbpd), Saudi Arabia (1.107 mbpd), with Venezuela in fourth place at 930 thousand barrels per day. Note that two of America’s top four energy importers are south of the Rio Grande.

Furthermore, Venezuela’s reserves according to OPEC now top those of Saudi Arabia, with Venezuela now estimated to have the largest conventional oil reserves and the second-largest natural gas reserves in the Western Hemisphere. Two years ago OPEC reported that of the organization’s 81.33 percent of the globe’s known oil reserves Venezuela had 24.8 percent, exceeding Saudi Arabia with 22.2

So, why is Chavez in Washington’s bad books? Well, among other reasons, for the company he keeps, as the Russian Federation, Iran and Cuba are all allies. Note that the first two are also major oil exporters.

Worse however are the social programs that Chavez has implemented to benefit his people, which not only smack of socialism but offer an alternative to Washington’s proscriptions. Case in point - Venezuela’s health care system. A joint Cuban-Venezuelan medical program, “Barrio Adentro,” has made health care free and accessible to all Venezuelans. Founded in 2003,  Barrio Adentro expanded Venezuela’s national health care system by employing more than 30,000 Cuban medical professionals as the government equipped clinics and hospitals with advanced high technology diagnostic and surgical equipment.

Something that Americans might consider as the presidential race heats up, with Medicare on the table. Such alternatives hardly please the powers that be in Washington, but are increasingly considered in Latin America.

But, back to energy. Despite the primacy of Venezuelan oil sales to the U.S. Caracas is shifting gears, and China will soon to become Venezuela’s main trade partner, with oil sales surging 60 percent in 2012.

During a recent interview Oil Minister Rafael Ramirez said, “We are selling 640.000 barrels of petrol per day to China.” This is now equivalent to 2/3 of Venezuela’s oil exports to the U.S., up from 400,000 barrels per day in February. For those with a sense of history, before President Chavez took office in 1999, Venezuela did not ship oil to China, but Chavez has stated that by 2015 he intends to ramp up Venezuelan oil exports to China to one million barrels of crude per day. According to Ramirez, the rise in exports will come from increased production in the natural resource-rich Orinoco Oil Belt in the east of the country.

It is hard to see this emphasis shift as anything but a short-sighted diplomatic disaster for the U.S. Compounding the degradation of Washington, which insists that China in Africa in particular exploits poor nations by buying resources at rock bottom prices, Ramirez said simply, "We are selling oil to China at a better price than what is sold in the U.S. market.'' And, given Washington’s foreign aid stinginess, last week President Chavez announced that China Development Bank will bankroll $4 billion dollars in development projects, to include housing, energy and industrial growth.

Again, those with a sense of history might note that the year Chavez took office, Venezuela exported to the U.S. market 1.5 million bpd.

So, where does Washington go from here? If it wants to preserve its increasingly tenuous foothold in a nation with the world’s largest oil reserves, it might begin by engaging in some honest diplomacy.


And match Chinese rates of pay.

By. John C.K. Daly of Oilprice.com

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  • Philip Andrews on August 22 2012 said:
    Or of course it can go for the 'simpler option' (read 'more simplistic option') and attempt regime change in Venezuela...

    Why doesn't the US simply adopt the Monroe Doctrine and 'simply' send in the Marines, topple Saddam Sanchez with some excuse about WMD in Venezuela then put some oil corporate in charge or make Venezuela an 'honorary' state of the Union...?

    I should imagine some 'bright sparks' in Washington/State/the Pentagon have already devised some dastardly plan to enable some such outcome to happen. I mean Venezuela is, like Cuba, in 'America's back yard'.

    What with the Russians, the Chinese and the Iranians courting Venezuela seems to me that at some point, esp. if the Republicans should win the Presidency, that such an option would be very much on the table...

    Latin American countries in 'that area' can only 'thumb their noses' at te US for so long before risking retaliation. I think Sanchez is very close to thaty line in the sand that shouldn't be crossed.

    The other thing is that the OPEC chart shows that not only is Venezuela slightly ahead of Saudi, but that if you combine Iran and Iraq they are also marginally ahead of Saudi (22.7% as opposed to 22%). Saudi's oil reserves and capacities have come into question recenrtly due to age and overuse. Iraq's have been either idle or grossly underproducing for years.

    In other words Saudi's position as the leading oil producer is now being sderiously challenged by Venezuela, Iran/Iraq, and Canadian oil tar sands. The latter hjave their own difficulties with environmental issues etc. However Venzuela and Iran/Iraq are serious challengers esp over the next 2 generations.

    We wouild do well do keep an eye on Washington's attitudes to both esp. if/when(?) the Republicans win the Presidency...which they are bound to at some point.
  • Randy on August 22 2012 said:
    A quote:

    "Barrio Adentro expanded Venezuela’s national health care system by employing more than 30,000 Cuban medical professionals as the government equipped clinics and hospitals with advanced high technology diagnostic and surgical equipment."

    What utter nonsense.

    Cuba imports about 125,000 barrels a day from Venezuela. The Venezuelan subsidy to Cuba amounts to about 5 billion dollars a year. The silly idea that Cuba sends a bunch of unquaulified doctors, nurses really, in exchange for said oil is loopy Cuban/Venezuelan propaganda. You've swallowed this inane drivel hook, line and sinker. Without the Venezuelan oil subsides the Cuban economy will simply implode. It will collapse in a heartbeat. It is the last life line that keeps the Castro brothers in power.

    Finally, of the 2.4 million barrels of oil that Venezuela produces on a daily basis, only 40 to 45% is exchanged for real dollars at going international market rates. The rest is piddled away for indigenous Venezuelan needs (800,000 barrels per day - resulting in the lowest gas prices on earth), 640,000 barrels ship to China for loan re-payments at rates which have been kept confidential from the Venezuelan public, and the remainder for what is essentially 'free oil' to places like Cuba, Nicaragua and a handfull of Caribbean islands. The decision of Hugo Chavez to send all that oil to China adds nearly 5 dollars a barrel to the price of that oil. This is not something 'you' should be praising. This is merely insanity.
  • Bob Berke on August 22 2012 said:
    The hostility of initial comments towards your article clearly illustrates the serious obstacles to normalized relations with Venezuela. Ever since Chavez nationalized Venezuelan oil, he has become a pariah in the U.S., despite the fact that nearly every oil producing country in the world has nationalized its oil industry, even freedom loving Norway. It makes little sense that we bow down to absolute monarchs like Saudi Arabia and Kuwait, or buy immense volumes of products from China, and then condemn Venezuela as its energ
  • Randy on August 22 2012 said:
    To: Bob Berke

    Hugo Chavez did not "nationalize Venezuelan oil." You have your facts wrong. PDVSA had been a nationalized oil company decades before Hugo Chavez came on the scene.

    And,...and, we should 'condemn' Hugo Chavez for the methods by which he transformed Venezuelan democracy into a one party state. The PSUV controls all of the public television channels in Venezuela and continuously threatens the only private source of information, Globovision, with threats and sanctions. That's worth condemning, surely.
  • Janko Svarc on August 22 2012 said:
    If Venezuela has become a one party state as I'm reading in a commnet here, it's probably thanks in no small measure to the opposition's own unexplainable state of disarray the scope of which falls beyond the oil industry/business itself. Hopefully, when the worldwide economic/financial crisis is over (may it be soon), Venezuela will be ready to provide for the energy needs of ALL of its customers, both old AND new, as it almost always has.
  • Hans Nieder on August 24 2012 said:
    I do not understand the theme of this article.

    With all of the committed Communists in the BO administration, you would think they would be pleased with the export trend of Redezuela to the Chicoms.
  • Slake on August 27 2012 said:
    Problem solved


Leave a comment

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