A Sudden Halt: Venezuelan Oil Trade in Limbo
Chinese imports of Venezuelan oil by sea came to a complete stop after the recent decision made by U.S. President Trump to impose tariffs on countries that import oil from Caracas. This development came in the wake of U.S. sanctions on Caroline’s attempts to purchase Iranian oil, adding to the existing unpredictability of the oil market.
Surprise and Confusion from Trump’s Tariff
The order put forth by Trump, which stated that “the US will begin imposing 25% tariffs on oil-having goods from any country whose Venezuelan imports oil after April 2,” came as a shock to Chinese traders and refiners alike. They are now suspended with no purchases until orders are received from Beijing.
Confusion Sows Caution Among Traders
“Uncertainty is the worst thing to happen to the oil market. For now, we won’t dare touch the oil.” A senior executive working with one of the Chinese traders of Venezuelan oil was quick to say after receiving this order from the states, as reported by Reuters. Another trading executive stated that the whole situation is in a “total mess,” despite the order and the confusion it will create with prospective buyers of fuel oil from Venezuela who are residing in Singapore.
China’s Dependence and Future Actions
As China is the largest purchaser of oil from Venezuela, it consumes 503,000 barrels (bpd) of Venezuelan crude and fuel, which totals to 55% of Venezuela’s exports. After transshipment, a large part of this oil is rebranded as Malaysian. Imports of Venezuelan oil, especially Merey grade, are mostly procured from independent refiners (“teapots”) in China who prefer and profit more from US-sanctioned Iranian and Russian oil.
Potential Strategies with Beijing’s Position
China’s argument and reasoning stand firmly opposed to unilateral sanctions. In response to the sanction, they stated, “The United States has long abused illegal unilateral sanctions and so-called long-arm jurisdiction to grossly interfere in the internal affairs of other countries,” said a spokesperson of the foreign ministry. China is already suffering from 20% additional tariffs imposed by the US on Chinese goods. In retaliation, China has also confirmed its counter tariffs and curbing the export of vital minerals.
The Pending Command from Beijing: The Course of Oil Trade with China Still Rests in Its Hands
Regardless of the ambiguity, a vast proportion of traders and market analysts are of the opinion that China will not request the complete suspension of oil purchases from Venezuela. They rationalize that “teapots” are bound by tight margins, which place a strain on finances, meaning they need cheap feedstock; hence, they will likely look for alternate means of purchase once there is greater “visibility.” An independent refinery official restates that, in his view, this is a “contravention of free trade” and claims that China “will clearly oppose it.”
Maintained Trade Contact Point and Flow Continuation
Further to the ‘teapot’ buyers, there have been reports suggesting that replacement ‘billionaire’ buyers from China began facilitating direct purchases of Venezuelan oil through a state defense company as part of a deal aimed at reducing Venezuela’s outstanding debt to Beijing. This situation is bound to endure.
Complex Geopolitical Condition Problem Solving
Further exasperating matters, in conjunction with recent U.S. sanctions on certain Chinese traders selling crude to China, have intensified the mix. The trade of Venezuelan oil for Chinese yuan is now situated in the anvil of intensifying disputes between the US and China. The pending weeks will be decisive in establishing the direction of this particular trade and its consequences for the global oil market.
