US embassy cable - 05CARACAS20

C O N F I D E N T I A L SECTION 01 OF 02 CARACAS 000020 
 
SIPDIS 
 
NSC FOR CBARTON 
USCINCSO ALSO FOR POLAD 
 
E.O. 12958: DECL: 09/10/2014 
TAGS: PREL, ECON, PHUM, KDEM, VE, Foreign Visits 
SUBJECT: CHAVEZ: CHINA MY OLD FRIEND 
 
REF: A) CARACAS 03928 B) CARACAS 03826 
 
Classified By: ACTING POLITICAL COUNSELOR MARK WELLS FOR 1.4 (D) 
 
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Summary 
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1. (U) Venezuelan President Hugo Chavez visited China from 
December 21-26 and met with Chinese President Hu Jintao, 
Premier Wen Jiabao, ex-president Jiang Zemin, and other 
senior GOC and business officials.  Chavez claimed that 
Venezuela has become the number one destination for Chinese 
investment in Latin America and estimated that in 2005 the 
trade relationship would reach almost USD 3 billion.  Chavez 
announced the signing of eight bilateral agreements focused 
on increasing cooperation in the energy, agriculture and 
technology fields.  He also said Chinese Vice-President Zeng 
Quinghong and Chinese National Petroleum Company (CNPC) 
officials would visit Venezuela January 27-29 to begin the 
implementation of the signed agreements.  While praising 
Mao's dictum about every country learning to walk on its own 
two feet, Chavez again criticized U.S. "imperialism" and 
praised China as a big country that does not act like an 
empire.  End Summary. 
 
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Second Best Is Good Enough 
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2. (U) President Hugo Chavez visited China December 21-26, 
meeting with Chinese President Hu Jintao, Premier Wen Jiabao, 
ex-president Jiang Zemin, and other senior GOC and business 
officials.   Chavez signed eight agreements in Beijing that 
will reportedly lay the foundation for giving Chinese oil 
companies preferential access to oil and gas projects in 
Venezuela as well as in the development of infrastructure 
projects. (Note: The Chinese National Petroleum Corporation 
(CNPC) currently operates two oil fields in Venezuela.)  The 
press has reported that China and Venezuela also reaffirmed a 
commitment to the development of a second orimulsion (a 
water/extra heavy crude mixture used for electrical 
generation) plant by the Chinese in Venezuela. 
 
3. (U) With respect to oil exports, Chavez said Venezuela 
would look to build an oil pipeline through Panama to 
facilitate oil exports to China.  After 100 years of U.S. 
domination, said Chavez, he was going to put Venezuela's oil 
exports at China's disposition, especially now that China had 
become the world's second largest importer of crude oil. 
Chavez said Venezuela would continue selling oil to the U.S., 
"but not only to them."  (Foreign Minister Ali Rodriguez 
later told reporters that Venezuela would increase production 
to accommodate increasing sales to China so as not to disrupt 
service to its "traditional partners.") 
 
4. (U) China's Minmetal and Venezuela's Corpozulia also 
agreed to increase coal production in Zulia State and to 
explore the possibility of an alliance to expand the iron and 
steel industry in Guayana.  Separately, the GOV approved a 
credit for USD 40 million to buy Chinese farm tools and 
machinery for small- and medium-sized farms in Venezuela, 
while the Chinese agreed to loan Venezuela USD 700 million 
for house construction.   The Chinese also agreed to 
increased investment for the construction of a Venezuelan 
national railroad. 
 
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Mao and Bolivar: The Best of Friends 
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5. (U) Speaking at a press conference, Chavez asserted that 
national heroes Mao Tse Tung and Simon Bolivar would have 
been friends if they had known each other "because their 
thoughts, despite the distance in time and geography, sprang 
from the same source."  If Bolivar had lived a few more 
decades, Chavez asserted, he would have ended up a socialist. 
 Citing Mao's dictum about every country learning to walk on 
its own two feet, Chavez said Latin America had paid a high 
price to be free and not follow the decisions coming from the 
Washington consensus and the International Monetary Fund 
(IMF).  He again criticized U.S. "imperialism" and called 
capitalism "the path to hell," while complimenting China for 
being a big country without being imperialistic.  Chavez 
described himself as "Bolivarian, Christian, and Maoist."  He 
also reaffirmed Venezuela's "one China" policy and opposition 
to Taiwanese independence. 
 
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Comment 
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6. (C) In trying to follow his "multi-polar world" foreign 
policy, Chavez is seeking support from countries he sees as 
sympathetic to his anti-U.S. message.  He is also playing his 
oil card.  While Chavez clearly wants to diversify 
Venezuela's oil export market away from the U.S., we doubt 
that China would be the optimal partner from a strictly 
business point of view.  The cost of shipping heavy 
Venezuelan crude to China, much less the costs associated 
with tooling Chinese refineries to receive it, would be 
large.  However, purely economic considerations seem to 
figure less and less in the policy decisions of the GOV.  The 
future of Venezuela's patented orimulsion fuel is a case in 
point.  Stating that it wished to optimize the state's return 
on each barrel of extra heavy crude produced, the GOV moved 
in the past year to terminate orimulsion expansion deals with 
the Canadians and the Italians.  Despite this, as noted 
above, Chavez has reportedly agreed to the development of a 
second orimulsion plant by the Chinese.  If this project 
moves ahead, it will be a clear indication of the political 
bent of Venezuela's energy policy. 
Brownfield