CARACAS: Chinese President Xi Jinping (R) shakes hands with Venezuela’s President Nicolas Maduro before their meeting at the Great Hall of the People in Beijing, China. Maduro is visiting China seeking financial assistance as Venezuela has been hit hard by recession.
China will loan Venezuela $5bn to boost oil output, the Venezuelan president said in a televised broadcast from Beijing, in a show of continued support for the troubled Latin American economy from one of its main creditors.
China has lent $50bn to Venezuela in oil-backed loans secured under former president Hugo Chávez but has become much less enthusiastic about adding to its exposure as the Venezuelan economy has worsened. Venezuela is the eighth-largest oil supplier to China, primarily of heavy crude that trades at lower than benchmark prices.
Nicolas Maduro, Venezuelan president, said in a broadcast aired in his home country on Tuesday evening that the deal would “increase oil production in a gradual way in coming months”. Mr Maduro is visiting China ahead of a military parade on Thursday to celebrate the end of the second world war in Asia.
Analysts said Venezuela’s economic woes combined with a global slide in oil prices posed China with a dilemma over its dealings with the Latin American country.
“There are two points of view in China,” said Lin Boqiang, energy expert at Xiamen University and an adviser to state oil company PetroChina. “One is that ‘they are on the rocks, don’t lend more’ and the other is that oil prices are so low it’s an opportunity to secure supply because we know the price will surely go up. You can’t say that either view is incorrect.”
Venezuelan production has slipped steadily because of chronic under-investment in the country’s ageing and complex oilfields, despite their importance to its economy and export revenues. Crude oil sales account for 96 per cent of Venezuela’s exports, and every $1 drop in the price of oil equates to a $700m hit to government revenues.
Mr Maduro said Venezuela currently sent about 700,000 barrels a day of oil to China.
A drop in oil prices to six-year lows has eroded Venezuelan state revenues as well as its ability to meet its payments on debt from China. Beijing extended the schedule for payment late last year, in the face of falling crude prices.
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