Was Maduro arrest actually cover to disrupt China?

[SSG Snuggle Bunny]

Venezuela is also an oil producer and sits in a geographically convenient place for coordinating trade amongst various enemies and rivals of the United States. There is a complex web of trade between these countries, and Venezuela is often involved. It sometimes finds itself in the trade system between Red China, Iran and Russia, and is a major supplier of oil to Red China. This oil moves in a "dark fleet" of tankers under US sanction, and they sometimes operate without flag or transponder on the high seas to run US blockades.

That oil has a common destination: Red China, and it serves a purpose beyond that country's endless need for energy. As everyone knows, Red China has numerous major projects throughout the world, using infrastructure and development deals in pursuit of its diplomatic objectives as its global reach continuous to expand. It has found a willing partner in Maduro's Venezuela, and Red Chinese investment has flooded into Venezuela over the years. Red China, however, doesn't usually extend credit for these projects willy-nilly and there is often security involved. In Venezuela's case, that security is oil.

So what happens now that this oil supply is threatened? Not only have the initial US actions against Venezuela's "dark fleet" threatened oil shipments to Red China, the US raid on Venezuela has caused them to essentially stop. Venezuelan state-owned oil company PDVSA's primary external partner - Chevron - has resumed oil shipments, but per recent shipping data, none of those shipments are flowing to the Orient. PDVSA's production continues to fall and its exports to Asia - which is to say, its exports to Red China - are in free-fall.

This poses a problem for Red China, which has major investments in Venezuela backed by oil-for-loans deals between those two countries. Red China invests in Venezuela's infrastructure (and gains an important foothold in this hemisphere and a means to coordinate and enable trade with major partners), and protects its capital exposure by using oil as security. With the oil trade between the two countries now collapsing, risk is back in a big way. Red China has now demanded that its major lenders assess their exposure to Venezuela and determine their risks in the new environment:

The National Financial Regulatory Administration (NFRA) also advised banks to strengthen risk monitoring of all Venezuela-related credit, seeking to assess potential dangers to China's lenders, the report added.

...

The Bloomberg report said the NFRA's move highlights growing concerns among regulators over potential shocks to the banking sector as geopolitical risks mount. Billions in loans have been extended over the past decade by China to the South American country, primarily led by policy banks such as China Development, the report added.

I have no idea if any banks in Red China are going to collapse if (likely when) Venezuela defaults and PDVSA can't ship oil to cover the shortfall, but Red China's regulators are trying to find out. There is a ton of exposure to Venezuela and the odds of repayment - and of non-capital diplomatic and geopolitical power returns - on their major capital investment is now very much in question. So are other Chinese investments in other Latin American countries like Cuba, which may collapse on their own absent Venezuela as a backer.
All of Red China's investments in Venezuela and Cuba, and some of its investments elsewhere in Latin America, could end up being total losses for Red China's lenders, and that may be a major blow. Time will tell. No wonder Red China has been so loud about this action as, per Reuters, it "tests [the] limits of China's diplomatic push." That may be putting it mildly.

Many of America's rivals and enemies have capital or operational exposure to Venezuela, but Red China leads the pack. Red China's external noise masks its internal scrambling to determine just how much exposure it has to Venezuela - and underscores how big a blow toppling Maduro may have been.

http://ace.mu.nu/archives/418009.php


What would a real estate billionaire know about debt exposure and credit risk?   

[SVPete]

The Maduro arrest will have significant effects with multiple nations, for several or many years.

* China's expansionism has had a continent-level setback;

* Russia has lost an oil-laundering partner and Russian SAM sales have taken another hit;

* Cuba may have lost the oil that was propping up their failing economy;

* As Venezuela's oil production infrastructure gets repaired and brought back online, world oil supply will increase, an economic hit to, among other nations, Russia;

* Drug- and thug-running into the US will be reduced for at least a time;

* Venezuela may get a decent government that will crush Chavez-Maduro corrupticrats and recover economically.