U.S. Embargoes Only Strengthens Venezuela’s Relations with Russia and China

16.08.2019
Given the escalation of unilateral coercive measures, signed by Donald Trump last week, geopolitical relations with the Eurasian front are conceived as the fundamental axis of Venezuelan action to cope with these broad-spectrum pressures.
 
Both Russia and China took a blunt political position in response to John Bolton's threats, developed in Lima during the “International Conference for Democracy in Venezuela.”
 
There, the National Security Advisor of the United States urged third parties, with emphasis on these allied nations, not to engage commercially with Venezuela since the U.S. government would be authorized to become subjects of sanctions to those who “continue to provide support to the illegitimate regime of Nicolas Maduro.”
 
The Russian Foreign Ministry, through its Information and Press Department, called the blockade actions as “economic terrorism.” For its part, the spokeswoman for the Chinese Foreign Ministry, Hua Chunying, said they were “a serious violation of the fundamental principles of international relations.”
 
A key aspect of the attributions granted to the U.S. Department of the Treasury to economically harass Venezuela is that the prohibition of financial transactions would also cover the payment of commitments made with foreign companies, which would meana difficulty in cancelling the Bolivarian Republic's commitments in dollars, with China and Russia.
 
The measure is a direct aggression by Washington with the aim of breaking the geopolitical support of Russia and China to Venezuela.
 

Russia and China Deepen Energy Projects in Venezuela

 
Clearly, economic alliances between these two powers of the emerging world and the Venezuelan government have substantial weight when mitigating the impact of U.S. embargoes.
 
Recently, the Bloomberg financial medium published an article that revealed an apparent agreement between Wilson Engineering, a subsidiary of a Chinese chemical engineering and construction management services provider, and the Venezuelan State to improve the main Venezuelan refineries in exchange for petroleum derivatives.
 
The agreement, although not confirmed by official sources, would alleviate the effects of the US financial encirclement against the state-owned Petróleos de Venezuela (PDVSA), which has interrupted the commercialization mechanisms of diluents and equipment necessary for its operations since August 2017, reducing production by almost 1.1 million barrels of oil daily.
 
According to Bloomberg, if the restoration of oil production occurs quickly enough, “it would weaken the US economic blockade and put Maduro in a stronger bargaining position” against local anti-Bolivarian actors.
 
The Wilson company has had commercial agreements with Venezuela since 2011, when it initiated the Deep Conversion project of the Puerto La Cruz refinery, in Anzoátegui state. Since then, it has managed to sign successive contracts with this refinery, becoming the largest construction project for a refinery in Latin America that has been obtained by a Chinese company.
 
Other agreements of the Chinese-Venezuelan relations have advanced in parallel to the legislative decisions that the White House took in order to force regime change in the country.
 

Economic Pressures are a Time Bomb for the Financial Stability of the U.S.

 
This is the case of the Sinovensa joint venture, located in the José Antonio Anzoátegui Industrial Complex. The oil company, which operates through a bilateral agreement between the National Petroleum Corporation of China (CNPC) and Petróleos de Venezuela (PDVSA), set the expansion of crude oil production from 105,000 to 165,000 barrels per day (BPD).
 
Currently, they started operations of a new mixing plant in the José Antonio Anzoátegui Petrochemical Complex. In a second expansion, oil production will rise to 230,000 BPD, according to the Minister of Petroleum and PDVSA president, Manuel Quevedo.
 
While this is happening, another geoeconomic actor in Venezuelan territory, Russia, adapts the bilateral agreements according to the new international financial landscape.
 
The Russian state company Rosneft amended a cooperation agreement, made with Venezuelan authorities in 2009, with a paragraph according to which the latter will create “favourable and non-discriminatory conditions and assist Rosneft Oil Company and the Rosneft Group, SA” in two gas fields.
 
In 2017, the Venezuelan government issued a license to Rosneft to work the Patao and Mejillones fields, located in the Venezuelan Caribbean. These fields have a gas reserve estimated at 180 billion cubic meters. The goal of the company is to reach a production of 6.5 billion cubic meters of gas per year for 15 years.
 
The modification of the document on gas plans, signed on July 10 and published by the legal portal of the Russian Federation, allows, among other things, that the Rosneft subsidiary, its suppliers and contractors, be exempt from VAT on goods and services acquired for the execution of projects.
 
It also exempts Rosneft from import taxes and customs duties related to gas exploitation.
 

Oil Recovery Puts U.S. Regime Change Operation at Risk

 
The U.S. has been adopting implicit embargo measures on the Venezuelan oil sector for months, a strategy that, in addition to pursuing the worsening of the country's economic conditions, seeks to reverse the current trend in the Latin American region, which has progressively progressed in greater commercial and energy treatment with the Eurasian block.
 
Some of these actions have touched interests in the US energy market. For example, with the bans on buying oil from Venezuela, refineries that still do not completely replace the Venezuelan diet are hit in their operation.
 
In addition, Chevron's assets are endangered in Venezuelan territory, a company that obtained a Trump license to operate in Venezuela until October, before the announcement of the embargo. If another license extension is rejected, assets in the country could be renegotiated by the Venezuelan State.
 
Economic pressures are also a time bomb for the financial stability of energy corporations in the U.S.
 
In this way, the renewal of energy agreements with Moscow and Beijing, despite the context of international isolation that is drawn to the Venezuelan nation after the Executive Order launched by Trump, seriously threatens the White House's plans to destroy the industry national energy, and therefore, diminish the possibility of affecting the geopolitical interests of its strongest opponents.