There are a number of reasons
why Beijing continues to back Maduro's government despite suffering financial
losses.
14 Jul 2019
On January 23, when US-backed
opposition leaderJuan Guaido declared
himself interim president of Venezuela, he thought deposing President Nicolas
Maduro from power would be easy.
He had a simple,
three-thronged plan: declare Maduro's presidency illegitimate by exposing the
irregularities in the election that brought him to power, establish a
transition government, and hold new elections that would bring the opposition
to power.
However, almost six months on,
Guaido is not any closer to loosening Maduro's grasp on power. The main reason
behind the 35-year-old opposition leader's failure to bring Maduro down is the
support that some prominent international powers, most significantly China, have
given to the Venezuelan government.
China, a global power with
significant financial and military ties to Venezuela,
refused to recognise Guaido's presidency on the grounds that doing so would amount to intervening in the internal affairs of a sovereign
state.
Guaido's foreign backers, the
US chief among them, interpreted China's stance on the issue as support for
Maduro and his government and even implied that China is responsible for the
ongoing crisis in Venezuela. On April 13, for example, during a visit to Chile,
US Secretary of State Mike Pompeo said that
he believes "China's bankrolling of the Maduro regime helped precipitate
and prolong the crisis in that country." More recently, US Southern
Command Chief Admiral Craig Faller claimed that Chinese support to Venezuela in
the form of surveillance technology has been “used to monitor and repress the
Venezuelan people".
Meanwhile, acknowledging the
important role China has been playing in the ongoing crisis, Guaido started a
campaign to convince Beijing to end its support for the Chavista government.
Only a day after Pompeo's
criticism of China, the self-declared interim president published an
op-ed in Bloomberg titled, Why China Should Switch Sides in Venezuela. In the article,
Guaido argued that the opposition government would protect China's interests
and investments better than the Chavistas and pledged to give China new
financial incentives in Venezuela if it agrees to seize its support to the
current government.
Guaido's article and Pompeo's
statements only confirm a fact many Venezuela watchers have been aware of for a
very long time: China's political stance is the key factor that will determine
the future of Venezuela.
Why is Venezuela important to
China?
While Beijing is an
indispensable economic and political partner to Caracas, the Latin American
nation is also very important to China.
China views the oil-rich
socialist country as a significant trading partner and a geopolitical ally in
its main political and economic rival US's backyard. Moreover, the investments
Beijing made in the country in the last couple of decades made Venezuela an
important component in China's future economic prosperity and energy security.
Cooperation between China and
Venezuela began to grow significantly following Hugo Chavez' ascent to power in
1999. Following Chavez' death in 2013, the good relations between the two
nations continued under Maduro's presidency. From 2000 to 2018, the trade
between the two countries increased more than 20-fold and the value of
Chinese direct investment to the country reached $6bn.
Meanwhile, the total value of Chinese loans to Venezuela surpassed the $60bn
mark.
The majority of China's loans
to and investments in Venezuela have been related to the oil sector. In 2007,
Beijing created the China-Venezuelan Joint Fund (FCCV), which
allowed Venezuela to receive loans from China in tranches of up to five billion
dollars, and pay them with shipments of crude oil. The FCCV allowed the Chinese
government to get involved in oil production in the Orinoco Oil Belt, which is
considered to be the world's largest oil reservoir.
Why is China still standing by
Maduro?
Having accumulated a
significant amount of debt over the past two decades, Venezuela is struggling
to repay Chinese loans, as its oil production continues to decline due to the
ongoing crisis casts. This puts China's economy and energy security at risk.
Meanwhile, the majority of Chinese direct investments in Venezuela have either
been put on hold or completely abandoned due to the unfavourable conditions for
business in the country.
Acknowledging the risk it is
currently facing in Venezuela, China reevaluated its objectives and limited the
issuing of new infrastructure loans in the country. It focused on
financing mixed enterprises that it has created in partnership with Venezuela's
state-owned energy firm Petroleos de Venezuela SA. It has also increased the
mechanisms of control over the final use of the credit issued to Caracas.
Despite these challenges and
the risk of suffering potential economic losses, Beijing continues to stand by
the Maduro government, at least for now. The official reason behind
this position is that the Chinese government is not willing to intervene in a
sovereign nation's internal affairs. However, this cannot explain its
motivation to continue supporting the embattled Venezuelan president at a great
cost to its economy.
Unofficially, there are a
number of other reasons. Beijing is still siding with the Venezuelan government
because it believes having a like-minded socialist ally in the US' backyard is
more important than any costs it may incur as a result of the ongoing
Venezuelan crisis.
Additionally,
"south-south cooperation" is currently one of the mainstays of
China's foreign policy and Beijing does not want to risk its reputation as a
leading trading partner and trustworthy investor in the global south by siding
with a US-backed opposition group and supporting its attempt to unlawfully
topple the legitimate government of a sovereign country.
Moreover, despite Guaido's
best efforts, China has no reason to trust the Venezuelan opposition. For
years, the position of the opposition regarding Venezuelan debt commitments to
China has been ambiguous. Today, Beijing has no reason to believe that after
taking power the opposition would agree to pay back the debts accumulated under
Chavista governments.
The Venezuelan opposition's
close relations with the Trump administration is another reason why China
continues to support Maduro. The Chinese government does not believe Venezuelan
elites who appear to be under the tutelage of the Trump White House would
protect its interests in Venezuela or in the wider region.
China's position, however, is
not set in stone. Guaido and his supporters can still convince the Chinese to
change their mind by distancing themselves from the Trump administration and
providing some form of reassurances that they would honour Venezuela's
financial commitments to China.
If the opposition indeed finds
a way to win the trust of Beijing, it would have a much better chance at
challenging the Chavistas and eventually taking power in Venezuela.
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