Following the threat of tighter sanctions against Venezuela, China has chosen to halt its oil imports from the South American nation to avoid any further conflict. China's largest energy firm, China National Petroleum Corp (CNPC), announced that it has canceled a 5 million-barrel order this month.
The move by CNPC was preceded by a new executive order placed by US President Donald Trump against Venezuela. The order, which was passed on August 5, authorized the imposition of added sanctions to any company or individual that directly or indirectly provides support to Venezuelan President Nicolas Maduro.
The executive order was meant to aid Venezuelan opposition leader Juan Guaido in his campaign to overthrow Maduro. Guaido is currently recognized by the Trump administration and 50 other countries as the country's leader.
Several other companies outside of the oil trade have also backed off following the US president's threats to impose stricter sanctions. Turkey's Ziraat Bank, the country's largest bank, also announced that it has cut all ties with Venezuela's central bank.
The recent moves by the major firms are considered to be a massive set back to Maduro's regime. Maduro has been heavily relying on the country's business with countries such as China, Russia, and Turkey to keep the cash flowing amid the ongoing humanitarian and economic crisis that has been plaguing the country.
Prior to the latest sanction threats, China had been the top destination for Venezuela's crude oil exports. The country's state-owned oil firm Petroleos de Venezuela SA (PDVSA) has had a close relation with China's CNPC to help it unload its oil production and consequently help bankroll Maduro's regime. The CNPC's cancellation will be the first time in more than a decade of the company forgoing Venezuelan crude.
Now that the CNPC has backed off, Venezuela will likely have a hard time finding an alternative buyer for its crude oil. The PDVSA has reportedly not yet found an alternative buyer for the 5 million barrels that CNPC had canceled this month.
While the cancellation of CNPC's orders will undoubtedly be a big blow to Venezuela, it actually doesn't mean that China has completely pulled back all of its oil transactions with the South American nation. According to reports, some of China's independent refiners are still continuing to import Venezuelan crude despite the US' latest sanction threats.
China's relationship with Venezuela does go as far back as the Hugo Chavez regime when China granted the government its first oil-backed loan. Over the past decade, China has issued loans to the South American nation estimated to be around $50 billion.
