Has Chavez Given the Farm to China?

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Has Chavez Given the Farm to China?

Hugo Chavez has been keen to boost China’s prospects of surpassing the US as a superpower. But are his energy deals good for Venezuela?

Venezuelan President Hugo Chavez has frequently raised eyebrows around the world with his apparent determination to create alliances with nearly every country that is, by Washington’s definition at least, a rogue: From Iran to Syria to Belarus. But one of Venezuela’s allies has always seemed a little out of place on the list: China.

Chavez’s embrace of China has certainly been enthusiastic. On a visit to Beijing in 1999, for example, Chavez told his Chinese hosts, ‘I think if Mao Zedong and Bolivar had known each other, they would have been good friends because their thinking was similar.’ More recently, Chavez vocally opposed the Nobel Peace Prize being given to Liu Xiaobo, saying, ‘Viva China! And its sovereignty, its independence and its greatness.’ And he’s been openly rooting for China to take over from the United States as the world’s most powerful country. ‘During the financial crisis, China’s actions have been highly positive for the world. Currently, China is the biggest motor driving the world amidst this crisis of international capitalism,’ he said on another visit to China.

But China, not particularly Maoist these days, has been more reticent about establishing a strong political relationship the South American nation, apparently unwilling to sign on to Chavez’s mission to weaken US hegemony.

This hasn’t stopped China eagerly trying to develop commercial relations with Venezuela, the world’s fourth-largest oil producer. That imbalance has led many in Venezuela to wonder if Chavez, in his zeal to court Beijing, isn’t driving a strong enough bargain in commercial deals, and is instead giving China discounted oil and getting nothing in return.

Trade between the two countries has increased dramatically since Chavez took office, from $85 million in 1999 to nearly $9 billion in 2008, according to Venezuelan government figures. China is particularly keen on Venezuela’s oil and other natural resources, investing heavily in the oil-heavy Orinoco Belt region. It has also discussed building a rail link between the Caribbean and Pacific coasts of neighbouring Colombia to create an alternative to the Panama Canal, which would greatly ameliorate the biggest hurdle of Venezuelan oil exports to China: the enormous distance. ‘China needs energy security and we’re here to provide them with all the oil they need,’ Chavez said last year.

But the single most significant element of the China-Venezuela relationship so far has been a $20 billion loan that Beijing offered to Caracas, partly repayable in oil. The deal is part of Chavez’s avowed goal to break the mutual dependence that the United States and Venezuela have on the latter’s oil: Venezuela is the United States’ fourth-largest supplier, and the US is by far Venezuela’s most important customer, importing about 60 percent of Venezuela’s oil.

But there’s concern in Venezuela that the terms of China’s loan are excessively generous to Beijing. The exact terms of the deal haven’t been made public, but a US diplomatic cable released by WikiLeaks quoted a state oil company official saying that Venezuela was selling oil to China for about $5 a barrel — and that China had angered Venezuela by selling it onwards to make a profit.

Venezuela has also agreed to sell China 40 million tonnes of iron ore, and the pro-Chavez website venezuelanalysis.com noted, apparently without irony, that the price agreed was: ‘$20 less per metric ton than South American competitors such as Brazil’s Vale are charging Japanese and North Korean firms, according to Bloomberg News. WISCO celebrated the deal for undercutting raw material prices that are normally controlled by Vale and two other major companies.’

Not everyone in Venezuela is so glad that Chavez is offering such low prices. ‘There are so many agreements it’s impossible to keep track of them all, but most of them are giving things up,’ says Arlan Narvaez, a professor of political economy at Central University in Caracas. ‘It’s his way of buying attention.’

But Chavez supporters say that the deals do in fact give Venezuela a better deal than previous agreements with the United States have. They say allegations of low prices are false, and that their contracts ensure that China doesn’t impose unfair conditions, while transfering technology to Venezuela so that Venezuela can eventually be self-sufficient. Venezuela’s Vice President Elias Jaua, at the time of the announcement of the $20 billion credit, praised the loan ‘not only for its size, but for the conditions of respect for our sovereignty, institutions, and vision of development.’

Carlos Escarra, the chair of the parliament’s foreign affairs committee, cites the example of a communications satellite, which was named after Simon Bolivar and built and launched in 2008 by China for Venezuela. The United States would only offer to sell space on one of its satellites to Venezuela, while China has offered to train engineers so that Venezuela will be able to build a satellite itself in ten years, Escarra says. ‘The (Simon Bolivar) satellite will be used for the health, education and the development of all the people of Latin America…We wouldn’t be able to do this without opening up our foreign policy to other countries.’

Still, some are unconvinced. One Venezuelan blogger, noting that Chavez had hailed the satellite as an example of socialist cooperation with China, wrote that: ‘It is a shame that the Chinese don’t think the same when they charged Venezuela $241 million, on top of the $165 million in the construction of the two ground control sites.’

Chavez’s political goals, some fear, are clouding his judgment when it comes to making commercial deals. China hasn’t embraced Venezuela as enthusiastically as Chavez has embraced China, with Beijing seeing Chavez merely as a willing customer, says Julio Cesar Pineda, a former Venezuelan diplomat who now hosts a foreign affairs show on the opposition network Globovision. ‘China (is) closer to the US than to Venezuela, but Chavez thinks they he can move them against the US – it’s absurd.’

China is interested in good relations with Venezuela, but it’s also interested in relations with many countries in Latin America from across the political spectrum, says Milos Alkalay, a former Venezuelan ambassador to the United Nations. Since Chavez has hostile relations with many of those countries, China wants to keep him at arm’s length politically, Alkalay says. ‘China is very clear in its interest in entering Latin America. They have a very slow diplomacy – of course they have the sense of opportunity, and are very aggressive about pursuing it, but not for a strategic relationship with Venezuela…So they’re very careful not to jump under the umbrella of “Chavez as the best friend of China” because they have dealings with Colombia, Brazil, Mexico.’

Maryclen Sterling, a sociologist and radio host who is generally pro-Chavez, says that although she understands the necessity of new alliances such as with China, she’s uneasy about how the government is going about it.

‘We’re in a war, and in a war the goal is to defeat the enemy, at all costs,’ Sterling says. But she’s not confident that Venezuela’s new allies will be any more selfless partners than the United States was. ‘Chavez is very naïve in certain things, and in general we’re a naïve country, and a lot of people say we’re doing terrible business,’ she says. ‘I’m concerned that we could be trading one empire for another.’

Still, she does see an upside. ‘At least in the short term it’s a way to break the hegemony – the US is an enemy that has to be defeated by any means necessary.’