Opportunity For Beijing And Washington In Venezuela’s Oil Crisis

By Matt Ferchen

Dropping oil prices over the last few months have triggered a wave of reports about which countries stand to win and which to lose. While Russia, Iran and others are suffering, Venezuela emerges as the biggest loser of all. With oil accounting for over 95 percent of Venezuela’s export earnings and nearly 50 percent of overall government revenues, the drop in global oil prices from over $110 a barrel during the summer to under $70 today has led to much speculation about a potential Venezuelan sovereign default or even government collapse.

On the other side of the dropping oil price equation sit the United States and China, the world’s two largest oil importers and Venezuela’s most important oil trade and investment partners. Although the U.S. has become decreasingly dependent on Venezuelan oil and China increasingly tied to the Venezuelan petrostate through trade and finance, Venezuela’s deepening crisis presents leaders in both Washington and Beijing, both newly committed to tackling climate change together, with a chance to engage on a cooperative and positive agenda. They are in a position to do so in a way that addresses the climate impacts of Venezuela’s extra-heavy oil as well as helping Caracas toward a more stable economic and environmental path.

Venezuela has the world’s largest proven oil reserves, the vast majority of which is extra-heavy crude in the Orinoco Basin, meaning that upstream and downstream processing has particularly high financial and climate costs. Despite the country’s unrivaled petroleum resources, and even with favorably high oil prices since the 2000s, Venezuela’s economy, society and politics have all become increasingly unstable and polarized.

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