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A Chinese company has signed up to help Venezuela revive its oil refineries and alleviate fuel shortages resulting from the inability of refineries to operate at anything even close to capacity.
Bloomberg quotes unnamed sources as saying Wison Engineering Services Co., a company headquartered in Shanghai, will use funds from Beijing’s Belt and Road initiative to repair Venezuelan refineries. Venezuela, for its part, will pay Wison in oil products.
This is the same approach that Caracas is using with other Chinese companies--and Russian ones, too--as U.S. sanctions have served one of their purposes: stripping the Nicolas Maduro government of vital cash. Their ultimate goal, however, removing Maduro from power, may be compromised by this latest deal.
The repairs, according to the Bloomberg sources, will last between six months and a year, and will help solve Venezuela’s mobility problem caused by fuel shortages. This mobility problem could ignite more protests if it worsens, but for now PDVSA is addressing it by keeping Caracas well supplied. The capital, as Bloomberg notes, is where the government is most vulnerable to protests.
Venezuela’s oil industry has been the target of the latest sweeping round of U.S. sanctions in the belief that crippling that will cripple the government beyond repair. For now, this crippling has failed to materialize, but the industry is struggling not just because of the sanctions but because of what most observers say are years of underinvestment and neglect of vital maintenance.
Washington’s latest move in the pressure against Venezuela was an executive order of President Trump that ordered the freezing of all assets owned by the Venezuelan government in the United States.
“All property and interests in property of the Government of Venezuela that are in the United States ... are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in,” the order said.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.
Moreover, both China and Russia work in unison to undermine US sanctions against Venezuela and to keep the Venezuelan economy afloat. The latest agreement between Venezuela and a Chinese company to help revive its oil refineries and alleviate fuel shortages is part of that calculation.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London