Venezuela Says China to Give $5 Billion Oil Loan

Crude sank to a six-year low last week and has lost about half its value in the past year as Saudi Arabia, the world’s top exporter, led OPEC to reject demands from members like Algeria and Venezuela to cut supply to bolster prices.

Venezuela has long used its oil wealth to subsidize basic goods like rice and toilet paper, which are sold at about a tenth of the price they command in Colombia. In other words, the government had fiscal pressures even before the collapse of oil prices.

The funds will go to increase oil production in Venezuela in the coming months, Mr. Maduro said without offering more details during an address from China that was broadcast on Venezuelan state television.

China has agreed to loan an additional billion, with the intention of having the money dedicated to boosting Venezuela’s struggling oil sector.

Maduro’s cash-strapped government had already secured a 5-billion loan from China in April.

“We can talk about what we can do to stabilise oil market and stabilise prices, what would allow us to overcome the current conditions”, Maduro said.

On August. 21 he declared a state of emergency along parts of the border, claiming an attack on a Venezuelan patrol was carried out by Colombian paramilitaries at the instigation of former president Álvaro Uribe. Maduro, who travelled to China following a stop in Vietnam in search of financial help “during hard times”, believes that the global economy is best served by oil prices “above $70 a barrel”, the report said.

Moscow wants to keep production high to defend its market share, and if it cut output it would, in the short term at least, lose revenue that it relies on heavily for its budget. Russian Federation needs to pump every barrel that it can in order to offset the decline in prices. To be sure, that is a much needed lifeline, but it may just postpone the day of reckoning for Venezuela, whom many are predicting could default on its debt as early as next year.