VOA News - Venezuela Signs Oil Deal with China

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Venezuela Signs Oil Deal with China
By Daniel Schearf Beijing 24 August 2006

Venezuelan President Hugo Chavez has signed a series of trade agreements with China and pledged to more than triple oil exports to the energy-hungry country within five years. Mr. Chavez, who is visiting China, also obtained his hosts' support for Venezuela's U.N. Security Council bid.

Hugo Chavez, left, and Chinese President Hu Jintao applaud during signing ceremony at Great Hall of the People in Beijing

Mr. Chavez on Thursday signed eight trade deals with China, including an agreement to jointly exploit Venezuela's vast oil reserves.

Mr. Chavez said Thursday he wants oil exports to China to double to 300,000 barrels a day by next year and reach 500,000 barrels per day within five years.

Venezuela sells most of its oil to the United States, but Chavez, an outspoken critic of Washington, has been courting alternative markets.

Michael Pettis is a financial analyst based at Beijing University. He says Chavez may not be able to loosen trade ties with the U.S. in favor of China.

"This seems more like posturing by Chavez than anything else," he said. "It's hard to imagine that it is economically efficient to divert a huge amount of oil away from its traditional markets towards China. There's really no reason to put in the transportation costs and the costs of diverting the supply of oil."

Mr. Chavez also met with Chinese President Hu Jintao Thursday. He told reporters that the Chinese leader had pledged support for Venezuela's bid to join the U.N. Security Council. Mr. Chavez welcomed China's support.

The United States opposes Venezuela's bid.

Mr. Chavez has said developing relations with countries like China are part of efforts to create a multi-polar world to counter U.S. influence.

However, financial analyst Pettis says China is not interested in the fiery populist politics of the left-leaning Latin American leader and is really interested in diversifying its sources of foreign oil to fuel its booming economy.

"Particularly, since much of Chinese presence in the oil industry tends to be very low quality, or countries with unstable governments," he added. "So, a country like Venezuela is very interesting because it's got high quality large amounts of oil and its basically been a fairly stable producer of oil over the long term."

Other deals under consideration during Mr. Chavez's visit to China, are purchases of Chinese made oil tankers and oil drills.

Mr. Chavez arrived Tuesday on is on a six-day trip, his fourth to China since 1999.

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VOA News - Venezuela Signs Oil Deal with China