Oil prices plunge brings Ecuador and Venezuela closer to China

amoy

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China grants $5.3 billion credit line to Ecuador | Energy & Oil | Reuters

BOGOTA Jan 6 (Reuters) - China has granted a $5.3 billion credit line to Ecuador as the oil-reliant Andean nation reorganizes its finances after a crash in crude prices slashed export earnings, Ecuador's official newspaper reported on Tuesday.

Ecuadorean Finance Minister Fausto Herrera said the government would tap $1.5 billion this year of the 30-year credit, which carries a 2 percent annual interest rate, El Ciudadano reported.

China's state-controlled and trade-focused Eximbank, which offered the new loan, has been one of Ecuador's top financiers, investing heavily in the oil and hydroelectricity sectors. World oil prices have fallen about 55 percent over the past six months.

The loan, granted during an official visit to China by Ecuador's President Rafael Correa, comes as OPEC's smallest member faces challenges from a plunge in global oil prices which on Monday forced the government to cut its 2015 budget by 4 percent.

Venezuela's President Nicolas Maduro, whose country now boasts the world's largest oil reserves, is also making an official visit to China and several unspecified OPEC countries in a trip that comes as Venezuelan bond prices plummet.
Venezuela's Maduro to visit China, OPEC nations amid cash crunch | Reuters

"I'm leaving today for an international tour ... a very important tour to take on new projects, given the circumstances of falling income that our country faces," Maduro said during a televised broadcast.

His first stop will be China, which has become Venezuela's principal financier through oil-for-loan agreements in which Venezuela receives cash up front in exchange for future deliveries of crude and fuel.

"Also, I'm going to visit other OPEC countries to continue high-level efforts (to create) a strategy for a recovery of oil prices, a strengthening of OPEC," Maduro said. He provided no other details.

Venezuela's economy contracted during the first three quarters of 2014, and its international reserves have deteriorated sharply amid tumbling oil prices.

The decline has spurred concerns that Venezuela may default on its foreign bonds, which in turn has pushed its bond yields to the highest of any emerging market nation.

Maduro denies the country will default. But he says Venezuela's government needs financing in 2015 and says borrowing on international markets is prohibitively expensive.
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The dip in oil price hurts producers big time. However, a silver lining is Latin Americans and Chinese are pulled closer in a long-term perspective. :namaste:

Warm-hearted Chinese will be rewarded when it gets out of the slump.

 
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Broccoli

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It's amazing how countries with oil wealth like Russia and Venezuela haven't managed to diversify their economy. Venezuela is not going to get back up because their stupid politics (central planning) holds them down and they don't have have any good leadership.
 

Sylex21

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Very cool. Interesting to see nations seek loans in times of need from non western sources.
 

Sambha ka Boss

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Can we say the middle East oil dominance has come to an end with newer sources of oil from Fracking. This should be taken as an opportunity to revive our economy and remove fiscal deficit.
 

amoy

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Once there was news that petrol was cheaper than mineral water per gallon in Venezuela so that even Colombians rushed across the border to buy"¦:eek: High spendings in social welfare and poverty relief but no productivity upgrade, even in their mainstay oil drilling. Therefore Chavezian "socialism" was unsustainable n doomed.

On the upside Venezuela has the world's largest oil reserves (?) so Chinese finaciers can eye a fair return in the long run.
 
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amoy

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Will China Save Venezuela? | The Diplomat

China has already extended over $50 billion in loans to Venezuela since 2007 in return for guarantees of oil deliveries in the future. With Venezuela in desperate need of financing, Maduro is hoping Beijing will once again open its coffers. However, China has proven reluctant so far to extend more cash to Venezuela beyond the $4 billion cash-for-oil deal President Xi Jinping signed with Maduro during a July visit to Venezuela.

Venezuela's Nuevo Herald, citing Inter American Trends, said that Maduro was on the cusp of winning at $16 billion loan from China, if Caracas is willing to agree to the "very harsh conditions" set forth by Beijing. According to Inter American Trends, China is once again seeking guarantees of future oil deliveries in exchange for the loan, which could require Venezuela to up its shipments to China by more than 100,000 barrels per day. Venezuela currently exports over 500,000 barrels of oil per day to China, more than half of which already go toward repaying previous loans.

This is not a done deal. Beijing remains reluctant to commit more resources to Venezuela, in part because of the precarious economic situation. As Eurasia Group analyst Risa Grais-Targow told the Wall Street Journal, China "learned a lesson from the initial no-strings-attached loans" made to Venezuela and is unlikely to go down that path again. The death of former President Hugo Chavez, who provided a personal bond between Venezuela and China, has also impacted the bilateral relationship. Still, China has an interest in preventing a Venezuelan default. Even if Beijing does not shell out billions in new loans, it could give Caracas permission to restructure repayment of previous loans, allowing Venezuela to sell more oil instead of shipping it to China according to the original loan terms.
 

Akim

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Venezuela army gets first batch of amphibious armoured fighting vehicles

Venezuela army gets first batch of amphibious armoured fighting vehicles VN16. First batch delivery of 6 amphibious armoured fighting vehicles VN16 for the Venezuela Army. Division de Infanteria de Marina General Simon Bolivar was the first Chinese vehicles, six tanks VN16 armed 105-mm guns (this is an export version of the Chinese ZTD-05,), six IFV VN18 (export version of the ZBR-05), and 120 trucks in North Benz 2629 (Chinese license Mercedes Benz NG2629) 120 4×4 6×6 and trucks. Vehicles arrived on board the vessel Chang Hang Hai Ji. Venezuela’s purchase of the VN16 would be the platforms’ first foreign sale. They first appeared in People’s Liberation Army and People’s Liberation Army Navy Marines service in 2006 as the ZTD-05. VN16 is an amphibious infantry fighting vehicle produced by China North Industries Corporation (NORINCO). The vehicle was developed based on ZBD2000 amphibious armoured fighting vehicle. The VN16 integrates all-welded steel armour hull and turret, and protects its crew from small arms fire, 12.7mm rounds and shell splinters. It is also equipped with nuclear, biological and chemical (NBC) protection system. The VN16 infantry fighting vehicle features six double road wheels and three return rollers. The upper part of the suspension can be covered by armour plates. The vehicle has a maximum range of 500km and can negotiate a gradient of 60% and side slope of 30%. It can cross a vertical step of 0.7m and trench of 2m. The vehicle can be launched at sea from amphibious assault ships and sails at high speed over a long distance to shore, while the maximum speed on water is about 45km/h.
http://defence-blog.com/army/venezu...phibious-armoured-fighting-vehicles-vn16.html
 

amoy

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Weapons for Oil ~ what a good deal! But the risk of default is also enormous. What if crude price keeps at the low level for a long time, years ahead probably? Meaning Venezuela has to pump more oil to pay off Chinese loans. In their Chavezian welfare state of low efficiency it's highly unsustainable. Thus the Maduro regime is very fragile.

Maduro: China Signs Off on $5B Loan to Boost Venezuela Oil Output
by Reuters|Wednesday, September 02, 2015

CARACAS, Sept 1 (Reuters) - Venezuela and China have signed a deal for a $5 billion loan designed to increase the OPEC country's oil production, Venezuelan President Nicolas Maduro said.

Maduro, speaking from China in a show broadcast on Venezuelan state television on Tuesday night, said the loan was destined "to increase oil production in a gradual way in coming months," without providing further details.

A source at Venezuelan state-run oil company PDVSA told Reuters in March that China was set to extend a "special" $5 billion loan that would likely stipulate hiring Chinese companies to boost output in the company's mature oil fields.

Venezuela has borrowed $50 billion from China through an oil-for-loans agreement created by late socialist leader Hugo Chavez in 2007, which has helped Chinese companies expand into Venezuelan markets amid chronic shortages of consumer goods there.

That financing has been especially crucial for Caracas since last year's oil market rout, which aggravated the country's severe economic crisis.

Eulogio del Pino, the oil minister and president of PDVSA , and Finance Minister Rodolfo Marco Torres were among key Venezuelan figures present at the president's "In Contact with Maduro" show, which broadcast this week from Beijing.

Speaking in front of a huge portrait of Chavez, Maduro also said that Venezuela currently sends around 700,000 barrels-per-day of oil to the Asian giant.

http://www.rigzone.com/news/oil_gas..._Off_on_5B_Loan_to_Boost_Venezuela_Oil_Output



~Tapa talks: Orange is the new black.~
 

DingDong

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It's amazing how countries with oil wealth like Russia and Venezuela haven't managed to diversify their economy. Venezuela is not going to get back up because their stupid politics (central planning) holds them down and they don't have have any good leadership.
These countries tried to use their "supplier" position as a blackmail tool, and got a boot up their @$$es. I wonder why these countries tried to repeat a failed experiment, Arabs had tried before and ended up with burnt hands and shattered ego. Russia as weapons supplier tried to milk India, but did not work and instead India decided to reduce dependency on Russia.

If we look at the kind of governments these country have then we will agree on two facts:
A. Centralized, Borderline autocratic governments
B. Egoist Leaders, too proud to be flexible

It is as if these countries are wearing a special handcuff, more they struggle more the handcuff tightens.
 

amoy

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I don't agree Venezuela fits into the category of "central planning".

Or do they have planning? [emoji38]

If they do they should have fared pretty well now making do with the reserves accumulated from the good times when crude was above 120$ pb .

~Tapa talks: Orange is the new black.~
 

Kathryn Ostrow

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This economic melt down will bring down Venezuela, Nigeria, Russia & will benefit China, India and other populating countries. And China will play the power politics this way and you will see many other countries coming toward the magnet.
 

pmaitra

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This economic melt down will bring down Venezuela, Nigeria, Russia & will benefit China, India and other populating countries. And China will play the power politics this way and you will see many other countries coming toward the magnet.
 

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