How China's stakes in Venezuelan oil complicate Trump's plan

United States President Donald Trump has asserted that Venezuelan oil now falls under his authority.

However, a significant share of that oil is contractually tied to China through long-standing agreements with Caracas, creating a sensitive diplomatic situation that could unfold over the coming weeks, reported the Associated Press (AP).

Some analysts believe Trump may seek cooperation with Beijing to keep trade relations stable. This comes as the US president is expected to travel to China in April to preserve the fragile trade truce he negotiated with Chinese President Xi Jinping late last year.

“The administration appears focused on avoiding unnecessary escalation or new irritants with Beijing while keeping leverage firmly on Washington’s terms,” Craig Singleton, senior director of the China programme at the Foundation for Defense of Democracies, told AP_._

Singleton added that he does not expect Trump to turn Venezuela into a “flashpoint that complicates trade dynamics or Trump’s personal engagement with Xi.”

China is owed at least $10 billion by Venezuela, according to multiple estimates. Former Venezuelan President Nicolás Maduro had been repaying that debt through oil shipments to China.

But if the interim government aligns with Washington’s demands, it could challenge the legality of those oil-for-loan arrangements and halt further payments.

According to a Morgan Stanley research note, two major Chinese state-owned companies — China National Petroleum Corp. and Sinopec — have claims to 4.4 billion barrels of Venezuelan oil reserves, the largest share held by any foreign nation.

US companies are also owed tens of billions of dollars after Venezuela nationalised its oil sector. It remains unclear how these claims will be settled or in what order creditors will be repaid.

This week, the US seized two sanctioned oil tankers as part of its broader effort to take control of Venezuelan oil exports.

US Energy Secretary Chris Wright said the US would manage the country’s oil sales “indefinitely,” placing the proceeds into American-controlled accounts that would eventually “flow back into Venezuela to benefit the Venezuelan people.”

The administration also announced plans to launch those sales using 30 million to 50 million barrels from Venezuela’s crude storage facilities.

When asked for further details, a Trump administration official, speaking anonymously to AP, said the policy aimed to reduce “adversarial outside influence” in the Western Hemisphere.

Washington’s use of energy leverage follows China’s actions last year, when Beijing restricted exports of rare-earth magnets and used its soybean purchases as a tool in the trade dispute with the US.

When Trump and Xi met in South Korea in October, they agreed to a one-year truce, rolling back high tariffs and export controls imposed on each other.

What are China’s stakes in Venezuela?

Between 2000 and 2023, Venezuela ranked as the fourth-largest recipient of Chinese government credit, receiving $106 billion in loans from Beijing’s official lenders, according to AidData, a research lab at William & Mary.

However, AidData executive director Brad Parks said it is unclear how much has been repaid and how much remains outstanding because Caracas stopped reporting detailed debt figures years ago.

While some estimates place the remaining debt at $10 billion, Parks said the actual amount could be higher, especially since US sanctions on Venezuelan oil may have delayed repayments.

The Chinese loans were structured under a unique system that relied on oil export revenues for repayment.

In China, Maduro’s capture reminded many of Libya’s Moammar Gadhafi, who had also made deals with Chinese firms before abruptly losing power.

After Gadhafi’s fall in 2011, Chinese companies were forced to abandon billions in investments.

Cui Shoujun, a professor at Renmin University, told the Chinese outlet guancha.cn that Venezuela’s transition government could declare Maduro-era agreements invalid and deem the debt to China unlawful.

China’s involvement in Venezuela has extended beyond oil. According to a Jefferies report, Chinese firms have invested in telecommunications, railways, and port infrastructure — all of which are now at risk.

Still, Jefferies noted that Beijing is likely to absorb any disruption because Venezuelan crude accounts for only a small portion of China’s oil imports, and China has diversified its energy sources while shifting toward electrification.

Just hours before his capture by US forces, Maduro met with a senior Chinese diplomat at the presidential palace and praised the long-standing relationship between the two nations, which had grown under his predecessor Hugo Chávez and helped China establish a strong presence in the region.

Venezuela remains the only Latin American country with a high-level strategic partnership with China, comparable to Beijing’s ties with Pakistan.

Maduro’s removal is expected to weaken China’s influence in the Western Hemisphere — a goal outlined in the Trump administration’s National Security Strategy.

What was Beijing’s response to Maduro’s capture?

Beijing said it was “deeply shocked” by what it described as the US’s blatant use of force against a sovereign state and its president, and said it “strongly” condemned the actions. China called for the immediate release of Maduro and his wife.

Chinese Commerce Ministry spokesperson He Yadong said on Thursday that no country has the right to interfere in economic and trade cooperation between China and Venezuela, describing it as a lawful relationship between two sovereign nations.

“No matter how the political situation in Venezuela evolves, China’s willingness to deepen bilateral economic and trade cooperation will not change,” He said.

Singleton said China’s influence in the Western Hemisphere is often overstated.

“Beijing can protest diplomatically,” he said, “but it cannot protect partners or assets once Washington decides to apply direct pressure.”

With inputs from AP