How China got a firm grip on 90% of Ecuador’s oil
China is serious about expanding its international portfolio: The Asian giant’s recent foreign purchases include a 20% stake in Brazil’s Libra oil field, a skyscraper near Wall Street, and the country’s Lenovo tried, but failed, to buy Canada’s Blackberry.
But these acquisitions pale in comparison to what records reviewed by Reuters are showing. According to a special report, China now controls 90% of Ecuador’s oil, an OPEC nation.
Through a series of financing deals with state-owned oil company PetroEcuador, China has coaxed the Latin American country into submission. Ecuador had little leverage: After a $3.2 billion default in 2008, money hasn’t exactly been flowing into the country.
China is expected to cover 61% of the Ecuadorian government’s $6.2 billion financing needs this year. As part of the deal, “China can claim as much as 90% of Ecuador’s oil shipments in coming years,” Reuters writes.
By mid-2013, Chinese state-controlled firms controlled 83% of its Andean friend’s oil exports. PetroChina, a branch of state-owned China National Petroleum Corp, holds about 60% of these shipments.
The Chinese “provide financing for our country and, in exchange, we ensure sales of oil at international prices,” Ecuador’s former Finance Minister Patricio Rivera told state-run TV earlier this year, as reported by Reuters.
Strapped for cash and eager to fund anti-poverty programs, Ecuadorian President Rafael Correa last month announced plans to authorize drilling in the Yasuni National park in the Amazon rainforest. In the grand world of OPEC however, Ecuador is a small player. The country produces just under 360,000 barrels per day, compared with 1.75 million barrels exiting nearby Venezuela – where China also has a firm grip, having negotiated $43 billion in loans. PetroChina also recently snatched up Brazilian Petrobras’s Peruvian oil and gas assets for $2.6 billion.