Last weekend President Hugo Chavez announced with great fanfare that Venezuela’s state-owned oil company, Petroleos de Venezuela SA (PDVSA), had signed an agreement with China National Petroleum Corporation (CNPC) to develop part of the Orinoco heavy crude area for which they had given Venezuela a $20 billion loan.
As usual with Venezuela and China, there is far less here than meets the eye. After clearing away all of Chavez’s bombast, the true picture emerges: China Development Bank is said to have agreed to come up with the money, but a bank official indicated there was no information available on the project. A genuine agreement to exchange oil for loans must include a schedule of the proposed transfer of funds and return oil shipments, plus a volume of oil shipments which implicitly constitutes a price. Not only is that information not publicly available, it apparently is not available to the bank that is obligated to lend the $20 billion.
Nevertheless, U.S. and global media dutifully (and uncritically) reported Chavez’s announcement of the $20 billion loan from the People’s Republic of China. Also reported were Chavez’s dubious claims that China had previously provided a murky $12 billion “bilateral investment fund” to Venezuela as well as an earlier $8 billion loan to build infrastructure.
Not that Chavez doesn’t need the $20 billion. The Venezuelan economy lies nearly in ruins, with soaring inflation, food scarcity, and massive joblessness, due to his mismanagement. As Sean Goforth of the Foreign Policy Association noted recently, Venezuela, Iran, and Russia constitute a VIRUS of instability that threatens the United States and Western order. Goforth adds that “unemployment is extremely high in all three nations, and Iran and Venezuela have the world’s highest rates of inflation.” So it’s not surprising to see Chavez spinning people in Venezuela with a bail-out story to fit his narrative: prosperity is just around the corner!
Back in the real world, however, foreign direct investment into Venezuela from most of the world has dried up in light of Chavez’s continuing expropriations of existing investors’ property and an investment climate of uncertainty stemming from his authoritarian power and mercurial temperament. Of course he wants Chinese investment. Chavez seeks to diversify Venezuela’s oil markets away from dependence on its traditional customer and top buyer, the United States.
And what has the Obama Administration done in response? They are engaged in some wishful thinking of its own. Last week in the Miami Herald Secretary of State Hillary Clinton and Energy Secretary Steven Chu called for “joining hands for low-carbon, clean-energy in the Americas.” Don’t hold your breath.