Author`s name Dmitry Sudakov

China cuts deals with Latin America to secure energy supplies and curtail U.S. influence

The People’s Republic of China has signed a number of energy contracts with countries in Central Asia, Africa, and Latin America. There are two interconnected aims that Beijing is set to fulfill by pursuing its policies in the regions. First, China intends to spend the bulk of its dollar reserves to maximum advantage. China is well-aware of the fact that the financial system of the West is bursting at the seams, and the global currency i.e. U.S. dollar is going to crumble sooner or later. Therefore, China finds it necessary to exchange in good time its dollar reserves for a material equivalent, chiefly oil and natural gas. The plan clearly explains why China continues to invest billions of dollars in Darfur, Sudan’s war-torn region that abounds in oil.

Second, China seeks to make the most of the development of other countries’ energy resources while keeping its own deposits intact. Few people know that China’s reserves of oil and coal are quite significant. However, those deposits are deemed strategically important, and therefore may not be developed until a special decree is issued by the government. Similarly, the cutting down of forest trees for timber is prohibited in China, which prefers importing timber either legally or illegally from Russia’s Siberia and the Far East. It is a lot easier to scour the world and buy the resources located in other countries. As if to guarantee the deliveries, China is building economic ties with regimes that are openly hostile to the United States. Being America’s potential enemy at the moment, China will be a real hostile opponent of the United States in the future.

A recent meeting of the Chinese-Venezuelan intergovernmental commission is a typical example of China’s economic policy in Latin America. During the meeting, the two countries signed 11 agreements for joint operations in energy sector, industry and agriculture.

Cooperation for the development of large-scale projects in Venezuela is top priority in Chinese-Venezuelan economic relations. The Chinese National Petroleum Corporation and Venezuela’s state-controlled oil company PdVeza signed an agreement that commits Venezuela to increase oil exports to China. Under the terms of the agreement, China will also assess the oil reserves found in the Junin-8 bloc in Venezuela’s Orinoco belt, the world’s largest oil-bearing area.

Venezuela plans to increase oil exports to China from 300,000 barrels per day to 1,000,000 barrels per day by 2010. Venezuela currently produces 3,200,000 barrels per day, exporting 1,500,000 barrels of its daily output to the United States.

By cutting the energy deals with Venezuela, China apparently succeeded in taking precautions to cushion a possible blow to its economy in case oil supplies from the Middle East are disrupted by a military operation in the region. The thing is that Iran’s oil accounts for about 12 percent of all oil imported by China. The flow of Iran’s oil to China may be cut off if a new war breaks out in the Persian Gulf. Both Washington and Tehran may opt to blockade the Strait of Hormuz (the one connecting the Persian Gulf and the Gulf of Oman). As a result, China and European countries alike will be unable to export any oil from the Middle East.

Vladimir Anokhin

Translated by Guerman Grachev