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The two superpowers are locked in an increasingly bitter competition for the world’s natural resources, especially oil and gas, as well as influence over key countries in Latin America, Africa, the Middle East and Asia.

Venezuela, which holds the world’s largest crude oil reserves of 303 billion barrels and a vast amount of minerals and metals, had been an anti-U.S. stronghold since Hugo Chavez’s election as president in 1999.

Following Chavez’s death in 2013, his successor, Maduro, intensified Venezuela’s anti-American populism. He also expanded ties with China under Xi Jinping, with oil as a cornerstone of their bilateral relationship.

Under Maduro’s direction, China took in as much as 80 percent of Venezuela’s oil production at huge discounts and on terms that favoured Chinese buyers.

According to U.S. Secretary of State Marco Rubio, Chinese firms were given a US$20-per-barrel discount, and it all came at the expense of the Venezuelan people.

“It was being used to pay down debt that they were owed. This is the oil of the people of Venezuela, and it was being given to the Chinese as barter,” said Rubio, who played a key role in planning Operation Absolute Resolve’s audacious military raid on Caracas to capture Maduro and his wife.

China’s credibility took a huge beating for its failure to protect one of its most important allies in Latin America and the Global South. With the Americans now effectively in charge of Venezuela, the Chinese have furthermore lost a guaranteed source of cheap oil supply. They must also pay hard cash for the heavy-sour Merey 16 crude from the Orinoco Belt that their refineries have become used to processing.

Some analysts downplay Venezuela’s importance as it contributes to just four percent of China’s seaborne crude oil imports. This positivity is misplaced as 600,000 b/d of guaranteed oil supply at a US$20-per-barrel discount for the long term is significant even for China’s huge 16.8 million b/d market. It represents an immediate and unbudgeted loss of at least US$4.3 billion a year for China’s refiners competing in a cut-throat industry.

But Beijing’s worry extends far beyond the profitability of its oil refiners. It must reckon with the long-term loss of easy access to 17% of the world’s total oil reserves, which in now in the hands of its biggest adversary. This will be a major consideration in any planning for future conflict and China’s energy security.
Even before January 3, China was already lagging behind the U.S. in the race for oil self-sufficiency. China’s 28 billion barrels of proven reserves are equal to just 62% of America’s 45 billion barrels. China’s 4.3 million b/d domestic production is far from meeting the country’s oil appetite of 16.8 million b/d. To meet the rising net shortfall of 12.5 million b/d, China is increasingly importing oil from politically unstable producers in the Middle East and Africa as well as war-stricken Russia.

By contrast, the U.S. is already the world’s largest oil producer with an output of 13.2 million b/d and the assurance of back-up supply from neighbouring Canada and Mexico. In taking control of Venezuela’s oilfields, the U.S. has further extended its energy superiority over China.