US-Venezuela oil deal deepens China’s energy security squeeze

A landmark oil agreement between Washington and Caracas threatens to cut Chinese refiners off from a cherished source of discounted crude, handing the United States greater sway over global oil prices. US President Donald Trump announced on August 28 that the US had reached what he called the biggest oil deal in world history with Venezuela, saying Washington had secured majority control of more than 65 billion barrels of the country’s proven oil reserves at no cost to American taxpayers. Under the arrangement, a US-backed private venture would hold a 55% stake in oil output from fields across 17 blocks, with development rights running for 100 years. Venezuela is projected to collect more than $209 billion in extra tax revenue, while the deal is expected to draw nearly $100 billion in private investment. “This deal is a huge win for both the American and Venezuelan people,” said Secretary of State Marco Rubio, the lead US negotiator, who worked alongside Defense Secretary Pete Hegseth and Venezuela’s acting President Delcy Rodríguez to finalize the agreement. The picture was complicated further by Washington’s Operation Economic Outcast, a sweeping sanctions campaign Treasury Secretary Scott Bessent unveiled on August 24 to cut off every remaining source of income for Iran’s government. The campaign also squeezes China’s access to discounted Iranian crude, with Chinese imports of Iranian oil falling to 534,000 barrels per day in August from 823,000 bpd in July as sanctions hit the tankers, brokers and banks that move it. Chinese commentators have broadly framed the US-Venezuela deal as a setback for Beijing’s energy security, expecting it to allow Washington to rely less on oil imports from Canada and the Middle East while pushing China toward pricier Canadian barrels, and predicting higher fuel costs at home even as Americans pay less. “The US is already the world’s largest oil producer and, with control over these 65 billion barrels added on, its say over global oil prices will reach an unprecedented level,” writes a Shaanxi-based columnist using the pen name “Xiaoche.” “The Organization of the Petroleum Exporting Countries (OPEC) will see its influence further weakened, and the geopolitical standing of traditional producers like Saudi Arabia and the United Arab Emirates will be challenged.” “For a major energy importer like China, the US now holds another card it can play at any time to apply precise pressure. If Washington one day says it wants oil prices below a certain level, it may actually be able to make that happen,” he says. He says Venezuela has effectively become an economic vassal of Washington, ceding control over the pricing, output, and sales of its 65-billion-barrel reserve, while Rodríguez’s political survival now depends on Washington’s backing, leaving Caracas with only limited independence. He says the episode shows how, when the stakes are large enough, rules can be rewritten and sovereignty redefined. However, he adds that China and Russia, which are owed substantial debt by Venezuela, are unlikely to stand aside and do nothing as Washington claims the Venezuelan oil, and will use diplomatic pressure and economic aid to back factions inside Venezuela resistant to US influence, making things harder for Washington. Venezuela is weighing an exit from OPEC, Bloomberg reported on August 29, a move that follows the new oil deal with Washington and reflects Caracas’s deepening alignment with US interests after the capture of former President Nicolás Maduro by US forces earlier this year. The idea has been discussed with US officials but not yet decided. Exiting would free Venezuela from OPEC’s production quotas just as the country, pumping only 1.16 million bpd, looks to ramp up output under the agreement. Zhenqing, a Shaanxi-based writer, says that if Venezuela really left OPEC the international energy market would undergo a deep reshaping, touching at least three key pieces on the board: The dollar would likely reclaim its role as Venezuela’s primary oil-settlement currency under US ownership, reversing a partial shift toward euros, yuan and crypto that sanctions had encouraged and reinforcing the petrodollar system. US Treasury yields could become easier to manage, as more US-controlled oil supply raises the odds of steadier prices, which in turn eases inflation pressure and gives the Federal Reserve more room to keep rates in check. OPEC+’s cohesion would take a further hit, as its remaining spare capacity concentrates in Saudi Arabia and Russia, especially if Caracas ramps up output outside the group’s control, complicating its efforts to manage the market ahead of 2027. He adds that China would be hit indirectly by these new trends, while Chinese refiners would need to find crude suppliers outside Venezuela and could face a modest price increase, though the impact would be mild and manageable since Venezuelan crude accounts for less than 3% of China’s total oil imports. The Donroe Doctrine Washington’s pivot toward the Western Hemisphere traces to December 4, 2025, when the Trump administration’s National Security Strategy asserted a “Trump Corollary” to the Monroe Doctrine, pledging to expand US military and economic influence across the Americas. It called for developing the hemisphere’s strategic resources with regional partners, repositioning US forces toward hemispheric threats, and making energy dominance in oil, gas, coal and nuclear power a top priority to create jobs, cut costs and curb rivals’ influence. Chinese state media were meanwhile celebrating what they framed as a victory in the US-China trade war, cheering Washington’s shift in focus as a US retreat from the Indo-Pacific back to the Americas. Trump’s strategy moved quickly into action, with US forces capturing Maduro on January 3, 2026, then striking Iran directly on February 28, a country outside the hemisphere but central, as a major oil producer, to the same energy dominance push. Some pundits saw some upsides instead, saying deeper US involvement in Venezuela’s oil sector could help Chinese firms recover long-held investments there. “Over the past decade or so, China has provided Venezuela with total loans of $50 billion to $60 billion through platforms including the China-Venezuela Joint Fund, mostly financing infrastructure such as railways, power plants, housing and oilfield upgrades,” says a Henan-based writer using the pen name “Tangtangtutu.” “Venezuela agreed to repay the principal and interest by channeling part of its oil export earnings into designated accounts.” “Outstanding loans now stand at roughly $10 billion to $20 billion, and the ‘oil-for-debt’ channel that once serviced them was cut off once the US took over Venezuela’s oil sales,” he says. “Washington’s help in expanding Venezuelan exports could still improve Caracas’s finances, though, making repayment to China more likely.” He says Beijing’s approach is either to extend the repayment timeline or to continue accepting oil as payment, while rejecting any major write-down. “Chinese refiners have been forced to switch to costlier Canadian heavy oil, which is reportedly running $8 to $9 more per barrel,” says Xiaoman, a Yunnan-based writer. “But the switch is not necessarily a bad trade.” He says Canadian oil sands crude is similar enough to Venezuela’s crude oil that refiners need only minor changes to their refining process, and its shorter shipping distance means faster turnover and more predictable deliveries. Read: China in the crossfire as US widens economic warfare on Iran Follow Jeff Pao on X at @jeffpao3