A little while back, I argued that information that China may have received oil from Venezuela for $5 a barrel does not represent growing Chinese influence in Latin America, but rather lousy negotiating tactics on the part of PDVSA officials. Lifted from comments (with minor edits), Setty argues that the sales likely represent (if they even happened) corruption inside Venezuela:
I hope you’ve now seen the unredacted text of that embassy memo.
In it, you can see that the embassy itself had doubts about PDVSA board member Fadi Kabboul, its source for this $5 a barrel information. The embassy people’s experience with him was identical to mine. He offers meetings and information and never comes through. He revises history. We don’t know anything about his motives.
Hence, I am loath to trust him on that $5 a barrel figure. Especially since there is evidence contradicting the $5 a barrel figure — it’s pretty clear from the contracts that China was supposed to pay more than that.
It is possible that PDVSA received only $5 a barrel for some shipments. But if that happened, I would bet that the gap between market price and $5 a barrel ended up in someone’s pocket. I think it’s a very long stretch to say that this price shows China has an imperial subject in South America.
Indeed, the most telling item in that memo is the hearsay about George Kabboul. George was at the time head of the shipping department of Venezuela’s state oil company. Previously, he headed its food division, an agency called PDVAL. A 2009 U.S. federal lawsuit named him as having demanded a $2 million bribe to let a ship land and deliver perishable food. Around the same time, pro-Chavez Venezuelans also denounced him for corruption. I don’t have independent information about him, and he isn’t here to defend himself, so please take all this with a grain of salt.
Which is why it’s amusing to read that when the U.S. invited him to come and chat with their information-gathering team, he was worried that he might be “in trouble.” Would any Venezuelan worry that the Chinese embassy had called him in because he was “in trouble”?
Whose empire is this, anyway?
I love that last line! Same as it ever was, perhaps.
Perhaps the strangest thing about the Bolivarian Revolution is how it has mishandled PDVSA, which is, after all, the ultimate source of the regime’s resources. Above is a time series of our best estimates of Venezuelan crude production. New estimates from the International Energy Agency show that the country’s oil production has recovered from the 2002 strike ... but even so, the company has done little other than tread water. To be fair, the company’s 2001 goal of increasing oil production to 5.5 million barrels per day (bpd) by 2006 never looked particularly realistic, at least not in that time frame, but it should be doing much better than it is.
There is, of course, a debate about exactly how much PDVSA produces, and how big its decline has been. A good overview of the state of the debate can be found here. Everything, however, points in the direction of decline: the question is about how much.
In fact, there is indirect evidence from the company that it is in trouble. PDVSA recently cut its 2015 production goal from 4.46 million bpd to 4.0 million. The company regularly abandons its production targets. As Setty said on his blog: we may as well autoprogram the headline “PDVSA cuts production goals” to reappear around this time every year.
In short, China has no influence in Venezuela, the U.S. does, and PDVSA is a wreck all on its own.