US control of Venezuelan oil jeopardizes debt repayments to China

Friday 23 January 2026 - 11:50

By: Dakir Madiha

US control of Venezuelan oil jeopardizes debt repayments to China

The United States' seizure of Venezuelan oil exports has stranded shipments intended to settle the South American nation's substantial debt to China, setting the stage for a potential showdown between the two global powers. This move threatens to further delay Venezuela's efforts to emerge from default, as roughly one-tenth of its $150 billion external debt consists of Chinese loans repaid through oil cargoes until recent U.S. actions halted President Nicolás Maduro's operations early this month.

Under the Trump administration, proceeds from Venezuelan oil sales now flow into a Qatar-based account controlled by Washington, granting the U.S. significant leverage over creditor payments. Documents from state oil company PDVSA reveal that supertankers like the Xingye and Thousand Sunny shuttled crude between Venezuela and China over the past five years as interest payments under a 2019 temporary deal. These vessels recently turned back toward Asia after sanctions prevented direct exports to Beijing, China's top buyer of Venezuelan oil last year at about 642,000 barrels per day, or 75% of total shipments.

Debt estimates to China vary, with Société Générale pegging it at around $10 billion and JPMorgan at $13-15 billion, mostly through oil-backed loans from the China Development Bank. Experts warn that U.S. dominance over Venezuela's finances could subordinate historic bondholders and complicate post-2017 default restructuring. Christopher Hodge, chief economist at Natixis and former U.S. Treasury official, described the situation as unprecedented, noting the challenges in creditor hierarchies even under ideal conditions.

China's Foreign Ministry condemned the oil export redirection on January 7, insisting on protection of its legitimate interests. White House spokesperson Taylor Rogers told Reuters that Trump's oil deal benefits Americans and Venezuelans alike, while a U.S. official clarified that purchases by China remain allowed, but not at previously discounted prices. If Washington presses for major write-downs and Beijing resists, the standoff could stall restructuring and economic recovery. Sovereign debt expert Lee Buchheit cautioned that China might withhold cooperation on future restructurings under the Common Framework until treated fairly, a leverage point carrying real weight.