The US takeover of Venezuela has placed billions of dollars in Chinese oil-for-loan debts at risk, analysts say, though they expect Venezuelan crude to continue flowing to China as the new government seeks immediate revenue.
An optimistic scenario would involve a US-led recovery helping Caracas to ramp up crude production and exports to help with repayments. However, analysts believe the new administration is more likely to challenge the very legitimacy of its debts to China.
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“To secure assistance from the International Monetary Fund and the United States, the new regime is likely to invoke the doctrine of ‘odious debt’ from Western legal systems, thereby providing a legal pretext for repudiating its obligations,” said Cui Shoujun, director of the Centre for Latin American Studies at Beijing’s Renmin University of China.
Odious debt, also known as illegitimate debt, arises when a new government argues that debt incurred by a previous regime did not benefit the nation and is therefore unenforceable. It has been invoked in Iraq following the fall of Saddam Hussein and, less successfully, in South Africa after the end of apartheid.
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While official data is opaque and Beijing has largely frozen new lending in recent years, data by various think tanks put China’s total lending to Maduro and his predecessor Hugo Chavez as upwards of US$60 billion, with the funds largely funnelled into infrastructure projects.
