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Viewing cable 07CARACAS669, CHINESE POLITBURO COMES TO TOWN

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Reference ID Created Released Classification Origin
07CARACAS669 2007-03-30 20:04 2011-08-24 01:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Caracas
VZCZCXRO0676
RR RUEHAO RUEHCD RUEHGA RUEHGD RUEHGR RUEHHA RUEHHO RUEHMC RUEHNG
RUEHNL RUEHQU RUEHRD RUEHRG RUEHRS RUEHTM RUEHVC
DE RUEHCV #0669/01 0892004
ZNR UUUUU ZZH
R 302004Z MAR 07
FM AMEMBASSY CARACAS
TO RUEHC/SECSTATE WASHDC 8268
INFO RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
RUEHBJ/AMEMBASSY BEIJING 0329
RUEHKO/AMEMBASSY TOKYO 0143
RHEBAAA/DEPT OF ENERGY
RUMIAAA/HQ USSOUTHCOM MIAMI FL
RUEATRS/DEPT OF TREASURY
RHEHNSC/NSC WASHDC
RUCPDOC/DEPT OF COMMERCE
UNCLAS SECTION 01 OF 03 CARACAS 000669 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
ENERGY FOR CDAY, DPUMPHREY, AND ALOCKWOOD 
TREASURY FOR KLINGENSMITH AND NGRANT 
COMMERCE FOR 4431/MAC/WH/MCAMERON 
NSC FOR DTOMLINSON 
HQ SOUTHCOM ALSO FOR POLAD 
 
E.O. 12958: N/A 
TAGS: ECON ENIV ENRG EPET PGOV VE CH
SUBJECT: CHINESE POLITBURO COMES TO TOWN 
 
REF: CARACAS 38 
 
1.  (SBU) Summary: During Chinese Politburo Member Li 
Changchun's visit to Caracas March 25-27, Venezuela and China 
signed six new cooperative agreements in the petroleum sector 
and reaffirmed a USD 6 billion joint development fund. 
Chavez assured China that Venezuela would be a trustworthy 
oil supplier and added that by the end of the year Venezuela 
would supply China with 320,000 barrels of petroleum/day and 
one million barrels/day within five years.  Though China and 
the BRV failed to resolve a lingering dispute involving 
orimulsion in the Faja (Reftel) and there was the typical 
high degree of political theatre to the visit, both nations 
appear committed to their strategic partnership in the 
petroleum sector.  End Summary. 
 
------------------------------------- 
Homage to Bolivar and Six New Accords 
------------------------------------- 
 
2.  (U) Politburo Member Li Changchun led a delegation of 
Chinese dignitaries, including the President of China 
National Petroleum Company (CNPC), Jiang Jieming, for a 
three-day visit to Venezuela March 25-27.  On March 26, after 
a morning visit to pay homage to Simon Bolivar at the 
pantheon, the Chinese delegation was received at PDVSA's 
offices.  The receiving Venezuelan delegation consisted of 
Chavez' senior ministers, including Minister of Popular Power 
for Foreign Affairs (MPPFA) Maduro, Minister of Popular Power 
for Energy and Petroleum (MPPEP) Ramirez, Minister of Popular 
Power for Finances Cabezas, Minister of Popular Power for 
Planning and Development Giordani, and Minister of Popular 
Power for Basic Industries and Mining Khan. Before leaving 
for Suriname on March 27, Li met with National Assembly 
President Celia Flores.  Playing up the significance of the 
Chinese-Venezuelan economic relationship, the pro-Chavez 
daily newspaper "Vea" estimated bilateral trade at USD 4.2 
billion. 
 
3.  (U) Chavez and Li participated in an evening signing 
ceremony on March 26 at Miraflores Place, during which the 
two nations signed six new agreements and reaffirmed a prior 
commitment to a USD 6 billion joint development fund, of 
which China would contribute USD 4 billion and Venezuela USD 
2 billion.  PDVSA will hold a majority 60/40 interest of the 
capital in the joint ventures located in Venezuela and CNPC 
will hold a 60/40 interest in the companies located in China. 
 
 
4.  (U) The PRC and BRV signed the following six agreements: 
 
--  Cooperative Agreement for the Donation of 10 million RMB 
(USD 1.25 million) between the PRC and the BRV, executed by 
Minister Maduro and the Chinese Ambassador to Venezuela Ju 
Yije. 
 
--  Petrozumano Accord:  The agreement provides for the 
creation of a joint-venture for the exploration, extraction, 
and transportation of hydrocarbons, executed by CNPC 
President Jiang Jieming and PDVSA President Ramirez. 
 
-- Cooperation Agreement between CNPC and PDVSA executed by 
Ramirez and Jieming.  This agreement evaluates the 
possibility of creating a mixed company to develop an 
additional 600,000 barrels/day of crude in three areas of the 
Faja.  The first is Block Junin 4, whose production is 
estimated at 200,000 barrels/day.  A second is Block MP-3 
where Sinovensa, a joint Venezuelan-Chinese company, 
currently operates (200,000 barrels/day).  The third is the 
Carabobo Block (200,000 barrels/day).  The crude extracted 
from the Faja would be sent to three new refineries in China 
with a capacity of 800,000 barrels/day to supply the Chinese 
market.  The agreement also envisions creating a mixed 
company for maritime transport of crude to the new 
refineries.  Capital in the maritime transport company will 
be split 50/50. 
 
--Agreement between PDVSA and CPNC to form a mixed company 
 
CARACAS 00000669  002 OF 003 
 
 
named Chinovenezuela, executed by PDVSA Vice President for 
Exploration and Production Felipe Vielma Perez and CPNC 
Director General for Europe and the Americas Li Shiju.  The 
purpose of the company is to service and maintain oil wells. 
--CPNC and Venezuela also executed two supply contracts to 
provide crude and fuel oil to the Chinese market. 
 
------------------------------------------- 
Venezuelan Oil Exports to China on the Rise 
------------------------------------------- 
 
5.  (U) During the signing ceremony, Chavez highlighted the 
developing relationship with China in the petroleum sector. 
Chavez said that, in the past, Venezuela was a "colony" of 
the United States and therefore was unable to export 
petroleum to China.  In an interview with "El Universal," 
Energy Minister Ramirez said that China would import 1 
million barrels/day of Venezuelan oil by 2012.  Chavez said 
that his goal has always been for Venezuela to become a 
stable and growing supplier of petroleum to China.  According 
to Chavez, in 2005, Venezuela did not export a single barrel 
to China.  In 2006, it exported 300,000 barrels/day, and in 
2007, he estimated Venezuela would export 500,000 
barrels/day.  (Note: There appears to be some confusion over 
the numbers, as PDVSA later backed down from the 500,000 
barrel estimate and proposed a more conservative target for 
2007 of 320,000 barrels/day.  According to "El Universal," 
the Chinese Ambassador to Venezuela said that China was 
currently importing 200,000 barrels of oil/day. End Note.) 
 
--------------------------------------------- ----- 
Chavez Takes Aim at the United States, Praises Mao 
--------------------------------------------- ----- 
 
6.  (U) In typical fashion, Chavez took shots at the United 
States during the signing ceremony, while praising Mao and 
the Chinese revolution.  In a thinly veiled attack at the 
United States, Chavez said  "China is a power, but it is not 
imperialist, for the good grace and luck of the world. 
Rather it is a revolutionary people and a revolutionary 
government that follows the line of Mao Tse Tsung and 
socialism."  He then proceeded to launch into a bizarre 
comparison between Chairman Mao and Bolivar to conclude his 
discourse. 
 
-------------------------------------- 
But what about the Orimulsion Dispute? 
-------------------------------------- 
 
7.  (SBU) One noteworthy aspect of the agreements signed 
between the PRC and BRV was what provisions they didn't 
contain.  CNPC has had doubts about the reliability of PDVSA 
and the BRV as partners after MPPEP ordered the 
Venezuelan-Chinese joint-venture Sinovensa to stop producing 
orimulsion in December 2006.  CNPC views the BRV's actions as 
an expropriation and is currently negotiating compensation 
with the BRV (Reftel).  The cooperative agreement between 
PDVSA and CNPC (para 4) regarding extending Sinovensa's MP-3 
block essentially says PDVSA and CNPC "agree to disagree" on 
the orimulsion issue.  The agreement reads "...would include 
an extension south of Block MP-3, subject to resolution of 
the existent problems between the two companies."   Since 
there is no indication that the disputes have been resolved, 
essentially the agreement is meaningless. 
 
------- 
Comment 
------- 
 
8.  (SBU) China and Venezuela have solid reasons for 
deepening their energy ties, which has strategic implications 
for both nations.  To reduce Venezuelan economic dependence 
on the United States, Chavez is looking to China as a 
destination for Venezuelan oil exports and a substitute 
location for refineries.  In Venezuela as in other countries, 
China is looking for a long-term relationship with an 
oil-producing state to fuel its rocketing economic growth and 
increased oil consumption.  That said, the failure of the two 
 
CARACAS 00000669  003 OF 003 
 
 
nations to come to an agreement on a key substantive issue 
with which the two state oil companies were grappling shows 
that the recent signings were largely about political 
theatre.  Industry contacts in the oil services industry, 
however, think that of all the countries who have signed 
deals in the Faja, China could be the most likely to 
seriously commit to the projects.  Venezuela also represents 
a potentially lucrative market for Chinese service companies. 
 
-------- 
Bio Note 
-------- 
 
9.  (U) Li Changchun, 58, was born in 1944 in Liaoning 
Province (Northeastern China) and holds an engineering 
degree.  Jiang Zemin appointed Changchun as the youngest-ever 
member of China's nine-man Politburo in 1997, and he 
currently is the PRC's top propaganda official (source: 
www.chinavitae.com). 
 
BROWNFIELD