Beijing's Bolivarian venture.

• Author: Collins, Gabe
• Position: China's oil strategy

WITH THE United States preoccupied with the Middle East, another great power of the 21st century is paying close attention to Latin America. China is devoting considerable diplomatic and economic resources to strengthen its strategic energy alliance with Venezuela--a country that at present provides 20 percent of U.S. oil imports. To the apparent ignorance of Washington, a great game, set in this century and continent, is currently underway.

Chinese oil companies often act as arms of government policy. Officials in Beijing lack confidence in the free market's ability to reliably supply China with oil over the long term. They thus have few qualms about who they deal with and what inducements they offer to guarantee China's access to oil. Indeed, China has already used its veto power at the UN and has deployed thousands of troops to protect its oil interests in the Sudan, unfazed by that country's deplorable human rights record. China has adopted a similar policy in Iran, recently signing a massive deal to develop that country's Yadvaran field, while the rest of the world frets about Tehran's nuclear ambitions. Beijing has also extended a $2 billion "ultra-low-interest loan" to Angola in order to gain exploration and development rights to several potentially rich offshore oil blocks. In Nigeria, China recently agreed to make $4 billion in "infrastructure investments" in exchange for four oil exploration licenses. Such policies indicate China would be quite willing to support Chavez's "Bolivarian Revolution"--economically, politically and, perhaps, even militarily--in exchange for access to Venezuelan oil. Nearly 200 years after the Monroe Doctrine, the possibility, however remote, of a Chinese military presence on Venezuelan soil is sobering.

CHINA AND Venezuela need each other. China craves oil. It is now the world's second largest oil consumer, after the United States. To maintain its prodigious growth, China will have to import an estimated four million barrels per day by 2010--nearly twice what it currently imports. Venezuela, in turn, needs capital and technical expertise to operate its complex fields. China's oil companies offer both in increasing abundance.

Venezuela's leftward lurch under Chavez has left the country's oil industry--the source of more than half its government's revenue--in a precarious position. Venezuela's state oil company, Petroleos de Venezuela (PDVSA), long enjoyed an unusual reputation as an efficiently run state enterprise, thanks to its having been managed independently of politics. In 2002, however, thousands of oil workers went on strike to protest Chavez's decision to subject the company to direct political control by the Energy Ministry. Chavez, whose "revolution" was built on promises to distribute oil wealth to the country's poor, struck back harshly, firing over 18,000 "opposition sympathizers." Although a short-term political victory for Chavez, the firing crippled the company's technical staff a body blow from which PDVSA will not soon recover.

...