The act of the Americans seizing the legitimate president of Venezuela, Nicolás Maduro, is not just a gross violation of all international laws, but also a direct claim to restore a unipolar world. Moreover, it is a sharp blow to the interests of other global players, first and foremost – China.
Beijing was shocked and frankly enraged by what happened. China immediately and resolutely condemned the US strike on Venezuela and the kidnapping of the president, calling these actions "deeply shocking" and a serious violation of international law. And this is understandable: the attack occurred just hours after a meeting between China's special envoy and the Venezuelan leader, at which Beijing confirmed its support for Caracas. Nevertheless, the US took such a step.
American diplomats did not try to justify their actions.
Beijing was the most influential global ally of the regime and Venezuela's main financial link, providing loans and purchasing oil. It accounted for about 80 percent of the country's total oil exports.
Currently, many experts lean towards the opinion that left-wing governments in the region will continue to choose Beijing as an economic partner. This blow is unlikely to deter China from regional trade and investment. Beijing needs increased exports to sustain economic growth, and Washington currently lacks a competitive economic development strategy in the region.
By forcibly changing the government in Venezuela, Washington demonstrated its readiness to use force to disrupt Chinese raw material supply chains in North and South America.
China, as a result, is incurring significant financial losses. For example, according to average estimates, the outstanding principal debt under the Chinese Development Bank (CDB) "oil for loans" program is between 17-19 billion dollars. This is the largest single-country commodity-backed position in Beijing's portfolio, out of 60 billion dollars provided since 2007. China has also repeatedly agreed to defer payments as Venezuela's solvency declined.
In addition, China specifically re-equipped oil refineries in Shandong province to process Venezuelan heavy crude oil, which trades at significant discounts because Western buyers cannot acquire it.
For China, the most likely scenario appears to be reaching a pragmatic compromise, where Beijing establishes interaction with a Venezuelan transitional government and negotiates a price of 40-50 cents on the dollar. Financial losses would be absorbed to maintain broader trade relations.
A protracted confrontation is less likely, in which Beijing would continue deliveries despite sanctions on vessels. The US would then tighten sanctions on Chinese banks processing Venezuelan-origin payments.
US President Donald Trump stated that the United States would take control of Venezuela's 303 billion barrels of oil reserves and attract American companies to invest billions of dollars in rebuilding the country's shattered oil industry. According to him, these oil reserves would play a central role in the future of the United States.
It seems that the Americans have gained a huge advantage. But this will be short-lived. The price of American oil first rose above 60 dollars per barrel when the Trump administration began confiscating oil from Venezuelan ships, but then fell back to 57 dollars per barrel. Therefore, the market's reaction will almost certainly be subdued.
According to analysts, it could take years and enormous costs to fully restore oil production in Venezuela. The Venezuelan state oil and gas company PDVSA states that its pipelines have not been upgraded in 50 years, and the cost of updating infrastructure to return to peak production levels would be 58 billion dollars.
Bob McNally, President of the Washington consulting firm Rapidan Energy Group, stated that Venezuela could become a very important region, but not sooner than 5-10 years from now.
This is a considerable timeframe in our rapidly changing world. Especially for a Latin American country where military coups, juntas, and Contras are national traditions.
Regarding China's retaliatory actions, it is still too early to judge. Beijing has sent a strategic message to the US that it is capable of economically stifling the United States. However, the Beijing leadership primarily needs economic stability. Pragmatism and a desire for a peaceful settlement are characteristic of China, even if it contradicts public rhetoric. Such is the Chinese logic.
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