Oil analysts suggest that, following the recent arrest of Nicolás Maduro by U.S. forces, China might shift away from Venezuelan oil imports and instead turn to increased Iranian crude purchases.
On Tuesday, interim President Delcy Rodríguez, alongside other Venezuelan officials, unveiled a plan to sell up to $2 billion worth of oil to the United States. This transaction could potentially redirect essential oil supplies from China to U.S. refineries.
President Trump announced that President Rodríguez will expel agents from China, Russia, Iran, and Cuba, severing economic ties with these nations. He also emphasized the need for exclusive contracts with U.S. refineries and advantageous prices for Venezuelan crude oil. The socialist regime has devastated Venezuela’s refining capacity, leaving the country, which is rich in oil but impoverished, reliant on foreign refineries.
WATCH — Trump: ‘We’re in charge’ in Venezuela:
Reports indicate that Secretary of State Marco Rubio informed U.S. lawmakers that Venezuela, struggling under President Trump’s blockade on oil shipments and sanctions, has filled all tankers and storage space with crude. He noted that the post-Maduro government could face financial collapse without generating revenue from oil exports. This situation is likely to coax Caracas into fulfilling Trump’s demands for directing shipments from China to the U.S.
On Tuesday, Venezuela declared it would swiftly transfer between 30 million and 50 million barrels of sanctioned oil to the United States. Additional administration sources claimed that shipments would continue “indefinitely,” with profits retained in U.S.-managed accounts and disbursed to Venezuela at U.S. discretion. Otherwise, this oil would likely have been sent to China.
On Wednesday, analysts indicated that China’s independent “teapot” refineries have quickly adjusted to the loss of Venezuelan imports, planning to make up for it with Iranian oil and possibly from Russia.
Chinese refineries had to respond promptly after the U.S. blockade cut off Venezuelan supplies on January 1.
Watch — President Trump: Venezuela’s candidacy is America first:
Currently, China is importing significantly fewer barrels from Venezuela than it used to. This decline is partly due to a drop in production levels resulting from Maduro’s problematic governance, and also because Russia has lowered its oil prices amid international sanctions over its 2022 invasion of Ukraine. Consequently, Venezuelan oil no longer seems as appealing to Chinese buyers, with imports falling to about 4% of China’s overall imports.
Since allowing private operators to purchase oil overseas in 2015, China’s small-scale “teapot” refiners have often relied on budget-friendly crude to sustain their business models. They have built a reputation for swiftly changing suppliers to secure the best deals.
These buyers tend to favor oil suppliers under Western sanctions because they often provide deeper discounts to secure sales. Venezuela had recently offered the biggest market discount at $15 a barrel until U.S. supplies were halted. In contrast, Iran’s offer stands at about $10 a barrel, which remains more attractive than non-sanctioned sources like Canada.
The Chinese Ministry of Foreign Affairs responded on Wednesday, describing Trump’s actions regarding Venezuelan oil as “bullying” that “violated international law” and compromised Venezuela’s sovereignty.
Mao Ning, a spokesperson, stated that “Venezuela is a sovereign state, entitled to full and lasting sovereignty over its natural resources.” He criticized the United States for exerting force against Venezuela and demanding preferential treatment for American interests in the nation’s oil reserves.
Mao Zedong’s outrage over Trump’s actions was palpable. He recognized that such a move could jeopardize China’s interests in other Latin American states, but unusually refrained from addressing whether China would increase financial or economic support for these nations.
Despite Mao’s claims about “international law” and “sovereignty,” the truth is that the Chinese government took a multibillion-dollar risk by engaging with Maduro’s regime, and they seem to have paid the price for that gamble.
As Beijing now navigates the aftermath of Maduro’s ousting, independent refiners in China have started sourcing cheaper crude from alternate markets. However, they may want to exercise caution when considering long-term agreements with Iran’s unstable government.
