Fiscal situation of the Maduro Regime Could Become Even More Compromised: China imposes new taxes on Venezuelan crude imports

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The Venezuelan oil industry has been part of the economic collapse that country has experienced since 2014 (reinforcing the collapse in other sectors and vice versa). From March 2016 to April 2021, oil production plummeted by 81.7% (1) from 2,430,000 to 445,000 barrels per day, levels similar to (and even lower than) those reached by the country after the oil strike at the end of 2002 (2). This drastic reduction in production has also significantly affected Venezuelan oil exports, which stood at 941,300 barrels per day in 2019, a decrease of 36.9% compared to 2018, as well as a decrease of 55.1% compared to 2016 (3). In 2019, given the political instability and the fraudulent elections that occurred in Venezuela during the previous year, the United States Department of the Treasury ordered the freezing of all the properties and assets of the state oil company PDVSA under US jurisdiction, and forbade transactions with Venezuelans associated with that company (4); as a mechanism to force the Maduro regime to release political prisoners, hold a free and fair election, and progress toward a democratic transition (5).

In an attempt to evade these sanctions, PDVSA has sent its crude shipments clandestinely to different countries, especially to China, to which it sent an average of 690,323 barrels per day (6) during the month of March 2021 despite the mechanical/technical problems that the main refineries in the country suffer. However, the Chinese government announced that as of June 12, 2021, it will begin to collect a tax between US $30/bl and US $40/bl as an environmental measure that penalizes extra-heavy crude from Canada, Iran and Venezuela. In this note, we will analyze the causes and implications for the Maduro regime of this new policy imposed by one of its strategic allies.

Increasing Chinese relevance in the Venezuelan economy

The consolidation of the bilateral alliance between Venezuela and the People’s Republic of China began in 2001, when the late former socialist leader Hugo Chávez signed eight bilateral cooperation agreements with then-Chinese President Jiang Zemin in the areas of energy, culture, technology and mining, including a credit line for US $ 20 million for the agricultural sector (7). For the next sixteen years, Venezuela increased its acquisition of products from China, increasing its imports by 1,163.3%. Whereas imports from China represented only 9.5% of Venezuelan imports in 2001, by 2017 that percentage had risen to 21.8%, a figure surpassed only by imports from the United States, which represented 26% of the total (8).

In 2007, a China-Venezuela Joint Fund was created. Under this fund, the Chinese government granted, through the China Development Bank, credits destined for projects in the fields of energy, mining and infrastructure. Venezuela paid for these credits with shipments of its crude oil. All this took place under non-transparent conditions (9). Through 2016, China’s contributions to the bilateral Fund amounted to US $ 62.191 million (10), which represents approximately 45.5% of the financing that China granted to the rest of Latin America and the Caribbean (11).

The environment is important, but the measures respond to other objectives

China is currently carrying out an accelerated process of restructuring and adaptation of its industrial base due to the high levels of atmospheric pollution it produces. Since 2014, the Xi Jinping regime implemented a series of measures for the Chinese industrial sector such as the use of technologies that work with fuels other than coal both in the capital Beijing and in the main industrial cities of the country; the decrease in the production of steel and aluminum, due to the fact that mineral coal was used as an input for refinement of these products, and the restriction of the use of automobiles in the most important cities. Not surprisingly, by 2020 its gas emission levels had been reduced by 15.8% (12) since 2018. Although the efforts of the Beijing regime to reduce the environmental impact of industry are palpable, air pollution levels are still very high far from the standards established by the World Health Organization (13).

As of June 12, 2021, an import tax will come into force in China on heavy and extra-heavy crude from Iran, Canada and Venezuela, whose value ranges between US $30/bl to US $40/bl (14). This will affect about 350,000 barrels. For China, the creation of this tax responds more to the need to control the domestic oil market rather than reinforcing its policy of reducing environmental pollution. In fact, it is estimated that China’s demand for crude from the Middle East will increase in the coming months, with the aim of reactivating the economy and internal movement in the country after the crisis caused by the COVID-19 pandemic last year (15).  

Compromise financial stability of the Maduro regime

This new tax will worsen cash flow problems for Venezuela, given that shipments of Venezuelan crude oil will be subject to heavy discounts as a result of the pressure exerted by the United States government through sanctions on clandestine oil exports, reflecting both the risks of sanctions, as well as the quality of the crude oil itself (16). This will discourage Beijing from continuing to buy Venezuelan crude, and while more revenues may be generated through other clandestine operations (17), these Chinese taxes may compromise the financial stability of the Maduro regime.

The imminent increase in the costs of extra-heavy crude opens the possibility for Chinese state refineries to import heavy crude from Iraq, Colombia, and Ecuador (18).This may also negatively affect Chinese independent refineries which enjoyed extensive import quotas for extra-heavy crude, especially Venezuelan, compared to peers owned by the Chinese State (19); forcing them to migrate their imports to other heavy crude blends from the Middle East, which are relatively more competitive compared to Venezuelan bitumen crude (given the new tax), for the production of asphalt in the country (20).

Despite the fact that the political support of the People’s Republic of China for the Maduro regime has been maintained, economic and financial relations appear to have stalled. At the time of writing this note, it is known that the last contribution of the China Development Bank to the Sino-Venezuelan Joint Fund was an amount of US $ 2 billion in 2016, and that the resources of the fund often failed to reach the projects that were to be developed (21), thus resulting in corrupt practices on the part of the Venezuelan regime. Faced with this scenario where Venezuelan clandestine crude exports are affected by the new tax, the flow of foreign currency to Venezuela will be seriously damaged, further limiting the margin of maneuver for the Maduro regime to maintain the bureaucratic and repressive apparatus, as well as forcing it to extract resources through the illegal, and environmentally costly, exploitation of gold and other minerals in the so-called “Arco Minero del Orinoco” (located in the south-east of Venezuela), among other activities.


  1. Source: OPEC, Thomson-Reuters, own calculations.
  2. Idem.
  3. Source: OPEC Annual Statistical Bulletin.
  4. See: que-consisten-sanciones-petroleras-eeuu-venezuela
  5. See:
  6. See:
  7. See: However, other sources indicate that the credit line granted was for an amount of US $ 18 million (see: Ríos (2015). “China y Venezuela: impulso, continuidad e incertidumbre”. Chinese Policy Observatory).
  8. Source: National Statistics Institute of Venezuela, own calculations.
  9. At the time of writing this note, the exact figures for crude oil shipments to China for debt payments are not available, as well as the amounts corresponding to interest payments and capital amortizations.
  10. Source:; own calculations.
  11. Idem.
  12. See:; own calculations.
  13. See:
  14. It is worth mentioning that this initiative also had the support of state-owned Chinese refineries, which would gain space in the Asian oil market, as well as facilitate imports of crude oil from Russia (see:
  15. Source:
  16. See:
  17. Such activities illegal extraction of gold and other metals of considerable economic value in the Orinoco Mining Arc (located in the southeast of the country), and drug trafficking through the Venezuelan border with Colombia and the Caribbean Sea (see:;;
  18. See:
  19. Source:
  20. See:
  21. For example, in July 2013 they arrested eight people responsible for embezzling US $ 84 million from the Sino-Venezuelan Joint Fund; As well as the works of the railway via Tinaco (center) to Anaco (northeast), which consisted of a stretch of 468 kilometres, with a disbursement of US $ 2,700 million, were not completed (see:;

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