Chávez Says China to Lend Venezuela $20 Billion

by SIMON ROMERO, New York Times, April 18, 2010

CARACAS, Venezuela — President Hugo Chávez said over the weekend that China had agreed to extend $20 billion in loans to Venezuela, pointing to deepening ties between the two countries as China seeks to secure oil supplies here.

The announcement of the loans follows other financing agreements with China that have softened a sharp economic downturn in Venezuela, including a $12 billion bilateral investment fund. China’s ties with Venezuela have grown increasingly warm in recent years, marked by rising Venezuelan oil exports to China, the Chinese launch of a satellite for Venezuela and the sale of Chinese military aircraft to Venezuela.

If the loans materialize, they could give Mr. Chávez a much-needed cash infusion. Some financial analysts, including the American investment bank Morgan Stanley, have said that Venezuela could soon face a cash crunch as it grapples with low oil revenues and a dearth of foreign investment.

“All the oil that China needs for its growth and consolidation as a power is here,” Mr. Chávez said at a ceremony on Saturday announcing the loans.

Details about the new financing deal were sparse. Xinhua, the Chinese government’s news agency, said it involved “soft loans” channeled through the China Development Bank.

The linchpin of the loans appears to be China’s thirst for oil, with the China National Petroleum Corporation, or C.N.P.C., agreeing to form a venture with Venezuela’s national oil company to explore for oil in southern Venezuela. Eventually the companies could produce 400,000 barrels a day in the area. Venezuela’s energy minister, Rafael Ramírez, said C.N.P.C. would need to pay $1 billion to move the venture forward.

Venezuela, faced with a slump in oil production, has recently been seeking to reach similar deals with energy companies from Russia, India and Spain, as well as the Chevron Corporation from the United States. Mr. Ramírez, the energy minister, also made a rare trip to Washington this month where he spoke about oil projects.

While the United States remains the top buyer of Venezuela’s oil, China is emerging as a new market. But the precise nature of energy relations between Venezuela and China remains something of a mystery. Venezuela claims it is exporting 460,000 barrels a day of oil to China, while Chinese government data show the country importing around 132,000 barrels a day.

Moreover, Venezuela’s government has announced dozens of oil-exploration and refining ventures with companies from an array of countries including Iran, Uruguay and China itself. But almost none have been completed during Mr. Chávez’s 11 years in power; the refurbishment of an oil refinery in Cuba is a rare exception to this record.

Link:  http://www.nytimes.com/2010/04/19/world/americas/19venez.html