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Ji Siqi

The United States represents the primary obstacle to continuing oil-for-loan arrangements between China and Venezuela, analysts say, creating a significant wild card in what ranks among the largest debt restructurings in history.
Following Washington’s abduction in January of Venezuela’s then president, Nicolas Maduro, Caracas is set to reveal a US$240 billion debt pile, according to a Financial Times report on Wednesday.
The disclosure, expected in the coming weeks, rivals the €200 billion default by Greece in 2012 during the euro zone crisis and stands to be the largest sovereign resolution ever in Latin America.
And in a departure from standard sovereign crises, the recovery framework was set to be managed by the US government rather than the International Monetary Fund, according to the report.
Analysts said the resolution would rank among the most complex sovereign debt settlements globally, given the dispersion of claims across multiple creditor types and jurisdictions, with the fate of China’s oil-linked debt a primary uncertainty.
While official data is opaque and Beijing has largely frozen new lending in recent years, data from various think tanks puts China’s total lending to the administrations of Maduro and his predecessor, Hugo Chavez, at upwards of US$60 billion, with the funds largely funnelled into infrastructure projects.
After years of repayment via crude oil exports, analysts put the outstanding balance at around US$10 billion to US$20 billion.
“The oil-for-loan mechanism has been operating for so many years, and it’s safe to say it has run quite smoothly, delivering a win-win outcome for both China and Venezuela,” said Wang Youming, a researcher at the China Institute of International Studies.


Wang said that the biggest obstacle to continuing the mechanism is the US’ control of the country’s oil sector following Maduro’s capture.
“If they could just keep fulfilling the previous contracts, especially under the past oil pricing terms, that would be ideal,” Wang added. “But honestly, I think it’s a long shot.
“The US clearly doesn’t want to see China’s influence grow bigger and stronger, including in Venezuela and Cuba – that much is very obvious.”
Venezuela holds the world’s largest proven oil reserves, estimated at 303 billion barrels – or around 17 per cent of global reserves, according to the US Energy Information Administration. However, a massive gap remains between Venezuela’s vast underground resources and its actual production capabilities.
China had been an indispensable buyer of Venezuelan crude oil, serving as the country’s primary economic lifeline under prior US sanctions.
But data from Kpler shows that no Venezuelan crude loaded in 2026 has been destined for China. All of the cargoes that have translated into year-to-date imports were loaded last year, before the US abducted Maduro, according to Xu Muyu, senior research analyst for crude at Kpler. On a monthly basis, imports fell to zero in June, Xu added.
While China’s ideal outcome for the debt restructuring is to maintain its current arrangement, where it can continue to be paid via the oil-for-loan mechanism, that is very unlikely at this point, according to Ashkan Khayami, a senior analyst of country risk at BMI, a unit of Fitch Solutions.
“China finds itself in a very unusual position as, on paper, it holds a significant sway over the Venezuelan government,” Khayami said. That includes a unique payment channel where oil proceeds are funnelled into accounts that Beijing controls, as well as valuable ventures and assets on the ground that are crucial for oil-production recovery, he added.


But since the US intervention in January, Chinese influence has been severely affected, with oil-export revenues and proceeds now flowing entirely through US-controlled accounts, the analyst explained.
“The US has emerged as the more significant gatekeeper,” Khayami said, adding that the global investor community was more responsive to its removal of US sanctions and its rhetorical signals to attract investment than to reactions from China. “In other words, the US’ sticks and carrots are more influential in the current dynamic.”
Washington was likely to view this as a “geopolitical battle” to limit China’s influence, Khayami said.
In response, China is likely to attempt more contentious actions, perhaps by threatening to limit the US’ access to critical minerals or by having joint ventures in Venezuela stop production, which could significantly damage the country’s fiscal and growth outlooks, Khayami said.
“But ultimately, we think that there will be a settled arrangement,” the BMI analyst noted, adding that creditors must recognise that if anyone is to recoup their investment, “there has to be collaboration” among all of the players involved.
The Latin American country is reeling from the aftermath of two severe earthquakes on Wednesday, with the official death toll rising into the hundreds as thousands remain missing.
Guo Jiakun, a spokesman for China’s foreign ministry, said on Thursday: “China stands ready to provide assistance within its capacity in an appropriate manner based on Venezuela’s needs.”


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Beijing’s influence in Caracas seen fading, with Washington controlling Venezuela’s oil revenues and debt overhaul, potentially triggering a stand-off


Beijing’s influence in Caracas seen fading, with Washington controlling Venezuela’s oil revenues and debt overhaul, potentially triggering a stand-off.


In Venezuela, China’s oil-for-loan deals run into debt restructuring, US ‘gatekeeper’ risk

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Beijing’s influence in Caracas seen fading, with Washington controlling Venezuela’s oil revenues and debt overhaul, potentially triggering a stand-off

Beijing’s influence in Caracas seen fading, with Washington controlling Venezuela’s oil revenues and debt overhaul, potentially triggering a stand-off