Puebla, Mexico, December 8, 2017 (venezuelanalysis.com) – China’s state oil company is suing its Venezuelan counterpart, PDVSA, demanding US$23.7 million in compensation over alleged breach of contract and conspiracy to defraud.
In court documents filed in a Houston tribunal in late November, Sinopec’s US subsidiary alleged it never received full payment for an order of steel products. The documents allege PDVSA has so far paid for only half of the order, which was made in 2012 and worth US$43.5 million.
The order itself included 45,000 tons of steel rebar, purchased for PDVSA’s subsidiary Bariven.
In its complaint, Sinopec USA described Bariven as a “uncapitalised shell with the sole purpose of preventing Sinopec from having a remedy”.
Dismissing Bariven itself as a “sham to perpetrate fraud against Sinopec”, Sinopec claimed PDVSA “hid behind a complicated series of subsidiaries and affiliates”, and “feigned promises to make full payment”.
The case was first reported by the Financial Times, while PDVSA is yet to respond publicly to the allegations.
China’s foreign ministry has sought to downplay the political significance of the dispute.
“We are willing to continue exploring cooperation with Venezuela in various sectors following a principle of mutual benefit and shared development,” foreign ministry spokesperson Geng Shuang told a press conference.
Shuang added that the case a “common commercial dispute”.
China has long been one of Venezuela’s closest supporters, and has loaned the South American nation around US$50 billion over the past decade. Much of that was accrued under a series of oil-for-loan deals, which saw China offer upfront loans in exchange for promises of future oil products shipments from PDVSA.
As of late January, PDVSA was running late on nearly 10 million barrels of refined petroleum product shipments, according to an analysis by Reuters. Some of the shipments were reportedly up to 10 months late.
Sinopec’s case against PDVSA is a sign Venezuela and China’s once warm relationship is deteriorating, Russ Dallen from investment bank Caracas Capital told the Financial Times.
“This is when we know that China is not going to bail these guys out,” he said.
Chief economist at investment bank Torino Capital Francisco Rodriguez agreed, stating the case was a sign Beijing had changed tack. He suggested Venezuela probably owes China around US$16.5 billion.
“I don’ think they’ll get any new money from China,” he said, before adding, “The Chinese have lost patience.”