Monday, May 22, 2006

Venezuela's Chavez Makes China Nervous

China is increasingly concerned that its ties to Venezuela's anti-American president, Hugo Chavez, could hamper efforts to build a worldwide alliance of developing nations.

China's so-called south-south strategy is important to the country's efforts to secure supplies of oil and other raw materials in competition with the United States, Europe, and Japan.

The strategy also seeks to slowly isolate and chip away at the power and influence of the US, which, in China's view, is the only country capable of preventing China's rightful rise to global economic and military dominance.

But Beijing takes a long view; as such, it is not interested in provoking the US as long as it remains a superpower.

In Latin America, the Chinese strategy is to avoid angering Washington while forging closer economic and even military relationships in the region--historically seen as within the US sphere of influence. In terms of national leaders, the ideal partner for China is a popular--but properly cautious--center-left leader. The presidents of Argentina, Brazil, and Chile fit the mold, as does Peru's Alan Garcia, who is favored to win the second and final run-off round in his country's presidential elections early next month.

Garcia's opponent, ultranationalist former army officer (and failed coup plotter) Ollanta Humala, who won a plurality in the first round, is exactly the sort of figure that China would like to avoid as it goes about its business in America's backyard. A populist demagogue, Humala is linked to a grassroots, family-run Incaist movement that promotes a racist ideology and hatred of "US imperialism."

The Chinese have taken a dim view of Humala from the outset of his campaign; but his recent plunge in popularity has Beijing's attention because the fall seems to have been accelerated by Hugo Chavez. The Venezuelan leader's strident support for Humala is seen as a kiss of death. According to a recent opinion poll, only 17 percent of Peruvians said they had a positive view of Chavez, whose threats to break off diplomatic relations with the Andean nation in the event of a Garcia victory pushed Peru's outgoing government to cut ties first.

"China would like to have its cake and eat it, too," a former foreign ministry official in Caracas told China Confidential. "China wants Venezuela's oil, but it does not want to be overly identified with Chavez. He is a crude embarrassment--no pun intended."

Energy-starved China plans to increase imports of Venezuelan crude in the context of an overall drive to diversify overseas oil supplies.

In 2004, China imported 12,000 barrels per day from Venezuela. This year, that number could increase more than 20 times--to 300,000 barrels a day--more than 10 percent of China's total oil imports.

China's largest oil company, CNPC (China National Petroleum Corporation), has licenses to explore for oil in Venezuela's vast Orinoco River belt, which sits atop giant, untapped deposits of heavy oil.

Thick, gummy heavy oil, which is found at varying depths all over the world, and has been produced for decades, is more expensive to extract and refine than light, or conventional, crude. But the recent rise in the price of light oil has generated renewed interest in the resource.

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