Venezuela: Implications for China’s Energy & U.S. Tech Rivalry

By Aniket Shah, Global Head of Washington, Sustainability & Transition Strategy

If there was any doubt, recent developments in Venezuela have put it to rest: energy security and industrial policy are back at the center of international competition. U.S. intervention in the country — home to the world’s largest oil reserves — could have significant implications for geopolitics and the US China Tech Rivalry.

Near the top of the list of affected stakeholders is China, which has historically absorbed more than half of Venezuela’s crude exports. The moment offers a useful test of how Beijing’s investments in electrification and energy diversification will shape its ability to absorb the loss of a major trading partner.

Continuing the firm’s work on US–China dynamics, Jefferies’ Sustainability and Transition team recently hosted Dr. Michal Meidan, Head of China Energy Research at the Oxford Institute for Energy Studies. She concluded that while near-term disruptions are possible, Venezuela’s practical importance to China’s over crude imports remains limited, and Beijing’s broader policy direction continues to reduce reliance on any single supplier.

This article synthesizes five key takeaways from the discussion.

1. China’s Exposure to Venezuela: Smaller Than Headline Risk Suggests

Dr. Meidan emphasized that Venezuela’s immediate impact on China’s energy and industrial policy is limited. That said, she expects broader US–China strategic and technological competition to continue intensifying. China’s exposure to Venezuela spans three main areas:

• Oil flows: While Venezuela exports more than half of its crude to China, those volumes account for only around 3 percent of China’s total oil imports. Shipments are concentrated among independent refiners, making disruptions inconvenient but manageable at the system level.

• Debt exposure: More material is Venezuela’s role in China’s oil-for-loans framework. Roughly 30 percent of Venezuelan crude production is directed to Chinese SOEs as repayment under long-standing lending arrangements. Dr. Meidan estimates that $50–60 billion has been lent to Venezuela since 2007, with oil pledged as collateral. Approximately $10 billion is believed to remain outstanding, prompting Chinese policy banks to reassess exposure amid the crisis.

• Human capital and broader investments: Chinese firms are deeply invested in Venezuela’s infrastructure. Beyond oil, investments span telecommunications, rail, ports, and other strategic assets. These exposures introduce operational risks should Chinese entities face exclusion under a new regime.

2. Short-Term Implications: Disruption, Not Dislocation

In the near term, Dr. Meidan expects operational disruption rather than systemic risk. Chinese operators may scale back production, reassess capital commitments, and review personnel safety. Financial losses are possible, but they are not existential from a national energy or industrial perspective.

3. Longer-Term Implications: Strategy Working as Intended

Over the longer term, China’s existing energy strategy — centered on diversification, strategic reserves, stockpiling, and electrification — has reduced reliance on Venezuelan supply. Brazil remains a key crude supplier, while Canada is emerging as a viable replacement source for heavy oil.

China is expected to continue hedging exposure through diversified partnerships and accelerated electrification. At the same time, uncertainty remains over whether a future Venezuelan government would honor existing RMB-denominated loan agreements.

4. The Five-Year Plan: Industrial Policy at Scale

Pending final release and approval, China’s next Five-Year Plan (5YP) signals a clear prioritization of technological innovation, including quantum technologies and next-generation manufacturing. The plan emphasizes scale, vertical integration, and rapid resource mobilization, rather than near-term efforts to resolve local government debt or real estate sector stress.

China aims to move beyond already established strengths — such as EVs and solar — into frontier technologies, with the strategic objective of consolidating its competitive position relative to the US.

• An Ecosystem Approach to Innovation: Rather than relying solely on subsidies or IP acquisition, the 5YP focuses on building vertically integrated ecosystems capable of delivering faster innovation cycles and durable cost advantages. Dr. Meidan expects execution to be uneven, but ultimately effective.

• Energy’s Role in the 5YP: Energy policy is designed to support industrial and technological expansion. Power system overcapacity is viewed positively in China, providing resilience and flexibility. Dr. Meidan expects this approach to continue.

5. The Investment Implications

Several investment-relevant themes emerge from the discussion.

First, oil will remain relevant in the near term, particularly due to petrochemical demand, even as China accelerates diversification into minerals and clean technologies. Chinese investment now spans extraction, production, and renewable installation across Latin America.

Second, foreign companies operating in Venezuela (and Latin America more broadly) face heightened uncertainty, likely driving renewed scrutiny of political risk, insurance coverage, and capital allocation.

Finally, Latin America’s strategic importance to China is increasingly anchored in critical minerals, particularly lithium, which underpins clean technology and electrification strategies.

For more insights from Jefferies’ Sustainability and Transition team, consult Jefferies Insights.