China’s state-owned Sinochem Corporation purchased a million barrels of Venezuelan crude oil for delivery in December — an unusual buy made possible when the Biden administration suspended human rights sanctions on Venezuelan oil in October.
Three traders familiar with the deal told Reuters on Tuesday that Sinochem received a discount of $11 per barrel for the Venezuelan heavy crude oil, which will be delivered to the Changyi refinery in Shandong province.
One of the traders noted that Sinochem “barely touched Venezuelan oil before,” even though it has plants that can refine that grade of crude oil. Sinochem, evidently, avoided Venezuelan products because the huge state-controlled company was worried about triggering secondary U.S. sanctions.
Independent Chinese refiners were more willing to take that risk and have been buying Venezuelan oil at discounts of up to $20 per barrel. They hedged their bets by claiming the Venezuelan crude was coming from Malaysia.
In an interesting demonstration of unpredictable consequences, the U.S. lifting sanctions on Venezuelan oil made it possible for Sinochem to buy its million barrels, but it also caused much of the supply of phony “Malaysian” oil to independent Chinese refineries to dry up because Venezuela was suddenly able to sell its oil elsewhere at higher prices. One of the most eager customers is energy-hungry India.
China’s independent oil refiners, colorfully known as “teapots,” also said they would scale back purchases of Venezuelan oil because the sanctions relief rules were confusing, prices were becoming unpredictable, and season demand was down anyway.
The Biden administration lifted sanctions on Venezuelan oil in October for a provisional period of six months, with further extensions possible. The allegedly temporary lift, justified as a reward for socialist dictator Nicolas Maduro agreeing to hold “free and fair” elections in 2024, is the most significant concession Biden has made to the Maduro regime. Venezuela’s state oil company estimated the regime would enjoy a 27 percent boost in income during the six-month relief period.
Maduro rewarded Biden’s generosity by endorsing the Hamas atrocities of October 7 and then ordering a criminal investigation of the opposition party’s presidential primary.
