China’s continued economic support of the Maduro regime has turned Beijing’s interests in Venezuela from economic to political. In Venezuela, Chinese loans are numb to the humanitarian and political crisis of the past four years. Earlier this year, Venezuelan President Nicolas Maduro traveled to China to negotiate a $5 billion USD line of credit—mainly to invest in PDVSA’s, Venezuela’s state-owned oil company’s, deteriorating infrastructure. Beijing signed the agreement without concern for the 165 protesters that died in 2017 or the 17 pounds Venezuelans have lost on average in the last four years due to food shortages. For the Chinese Communist Party, the only concern is keeping the Venezuelan government afloat.
China’s strategic interests in Venezuela are rooted in the Latin American country’s crude oil. Venezuela has the world’s largest oil reserves and China is the world’s largest crude oil purchaser. Over the last decade, China has tightened its grip on these reserves by executing $60 billion worth of loans-for-oil deals in which Venezuela pays for loans through crude oil exports. China’s interests are to maintain control over Venezuela’s crude oil reserves– an economic interest that now has political consequences.
Since the humanitarian crisis began in 2014 and Venezuela entered a state of hyperinflation, China’s economic interests in Venezuela became political and are centered in maintaining the Maduro regime economically alive. If the Maduro regime is unable to pay back China, one of two possible scenarios can occur. First, the Maduro regime can default but stay in power. Under this scenario, China will likely have to write-off the $23 billion as targeting Venezuelan assets abroad would tarnish Sino-Venezuelan relations and debilitate China’s access to Venezuelan crude oil. The second scenario considers a situation in which the opposition installs a new government. In this case, an opposition government is likely to see China as an adversary. The National Assembly never approved the Maduro-negotiated loans, which renders them unconstitutional. A new government could refuse to repay these loans and rely on the West for help.
In the last few years, the Venezuelan depression has become the most alarming crisis in the Western Hemisphere. The UN estimates that 2.3 million people have fled the country, 1.3 million of whom are malnourished. Hyperinflation has hit approximately 1 million percent this year and the economy has decreased by almost 50% compared to 2013.
With Venezuela’s crisis likely to continue well into 2019, two questions arise. First, to what point will Beijing keep the Maduro regime economically alive? Second, apart from loans-for-oil, how can Caracas and Beijing cooperate to mitigate this humanitarian crisis?