China's relations with Venezuela (1999-2016) : a radical geopolitical account

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Graduate School of Social Science

China’s Relations with Venezuela (1999-2016): A Radical Geopolitical Account

Jim Beerepoot (10247890)

jim.beerepoot@gmail.com Supervisor: Dr. Mehdi P. Amineh

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Master Thesis The Political Economy of Energy 2017-2018 Jim Beerepoot [page intentionally left blank]

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Master Thesis The Political Economy of Energy 2017-2018 Jim Beerepoot

Acknowledgements

First of all, I need to thank my devoted supervisor Mehdi Amineh, who has provided a great part of the fundament of my knowledge on geopolitics and geoeconomics. In addition, not unimportant when writing a thesis in a healthy way, he has made sure that the work and stress was divided more equally throughout the entire thesis period. Lastly, throughout the process he kept providing feedback about possible theoretical and technical caveats that could distort a proper hand-in.

Secondly, I would like to thank my entire thesis group for providing me feedback and asking the questions that have helped me a great deal in thinking processes that came along with writing this thesis. More in specific, I would like to thank Bart, Niek, plus a special note of attention to Lucas and Niccolo for drinking coffees and philosophizing about pain points in the process of writing a thesis, as well as being part of some relaxation time before and after the thesis sessions.

Third, I would like to thank my parents for helping me out financially so I was better able to focus on this research, as well as them plus my brother Eric for having the willingness to listen to stories about Chinese supply security around dinner time on a Sunday evening.

Fourth, I express my gratitude towards my employer Sungevity and the chief of my department, Wouter Hoekstra, for being flexible concerning my working hours during this thesis period.

Last but not least, I am thanking my girlfriend Rachnel, who I started dating with during this thesis period, and who has overheard all of my concerns and frustration. She still managed to stick with me and was always able to provide positivity in periods of slight despair.

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Maps

Map 1: Map of the People’s Republic of China

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Map 2: Map of the Bolivarian Republic of Venezuela

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Map 3: Companies Active in Orinoco Oil Belt

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List of abbreviations

ARAMCO Saudi Arabian Oil Company

BANDES Bank of Economic and Social Development of Venezuela bcm billion cubic meters

BP British Petroleum bpd barrels per day

BRI One Belt, One Road initiative

BRICS Brazil, Russia, India, China and South Africa BRV Bolivarian Republic of Venezuela

CDB China Development Bank

CELAC Community of Latin American and Caribbean States CNDRC China National Development and Reform Commission CNOOC China National Offshore Oil Corporation

CNPC China National Petroleum Corporation CPC Communist Party of China

CR Caspian Region

CSO civil society organization CVJF China-Venezuela Joint Fund EBL energy-backed loan

EIA U.S. Energy Information Agency EIBC The Export-Import Bank of China ENI Ente Nazionale Idrocarburi

EU European Union

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Master Thesis The Political Economy of Energy 2017-2018 Jim Beerepoot IEA International Energy Agency

FDI foreign direct investment

FYP Five Year Plan for National Economic and Social Development ICC International Chamber of Commerce

IDB Inter-American Development Bank IEA International Energy Agency IMF International Monetary Fund IPE International Political Economy IR International Relations

IOCs international oil companies JIF Joint Investment Fund

km kilometer(s)

LAC Latin American and the Caribbean LNG liquefied natural gas

M&A mergers and acquisitions mb/d million barrels per day mto million tonnes of oil MEA Middle East and Africa

MEE Ministry of Ecology and Environment MEP Ministry of Energy & Petroleum MLR Ministry of Land & Resources MOFA Ministry of Foreign Affairs MOFCOM Ministry of Commerce MNC multinational corporation

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Master Thesis The Political Economy of Energy 2017-2018 Jim Beerepoot MOE Ministry of Energy

MOU Memorandum of Understanding MSR 21st Century Maritime Silk Road policy NATO North Atlantic Treaty Organization

NDRC National Development and Reform Commission NEA National Energy Administration

NEC National Energy Commission NGO non-governmental organization NOC national oil company

NSC National People’s Congress OAS Organization of American States OBL oil-backed loan

OSA Operating Service Agreement

OPEC Organization of Petroleum Exporting Countries PDVSA Petróleos de Venezuela, S.A.

PIC Petroleum Intelligence Weekly PSC Politburo Standing Committee PLA People’s Liberation Army of China PRC People’s Republic of China

PV Photovoltaic

RBIO rule-based international order

RMB Renminbi

RRCs resource-rich countries

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Master Thesis The Political Economy of Energy 2017-2018 Jim Beerepoot SDPC State Development and Planning Commission of China

Sinopec China Petroleum and Chemical Corporation SREB Silk Road Economic Belt

SIPRI Stockholm International Peace Research Institute SOE state-owned enterprise

tcm trillion cubic meters

TIF trade, investment and finance

UN United Nations

U.S. United States

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List of figures and tables

Figures

Figure 1.3.1: Model relation causes for policy and nature of policies 7

Figure 1.3.2: Conceptual model of geopolitical economy 13

Figure 2.2.1: Consumption - Energy source mix - China (2017) 23

Figure 2.2.2: Production – Fossil fuel mix - China (2017) 25

Figure 2.3.1: Overview State bodies overseeing energy sector 28

Figure 2.4.1: Relation NOCs and State bodies 30

Figure 3.3.1: Energy Consumption Venezuela (2017) 49

Figure 4.3.1: Chinese petroleum imports (1999-2016) 64 Tables

Table 3.3.1: Oil production Venezuela (1999-2017) 50

Table 4.2.1: Sino-Venezuelan high-level diplomatic exchanges (1974-2017) 62

Table 4.3.1: China-Venezuela trade balance (1999-2016) 63

Table 4.3.2: Chinese petroleum imports and total imports from Venezuela (1999-2016) 65

Table 4.3.3: Overview Chinese loans to Venezuela (2008-2016) 69

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Abstract

China’s centralized state-market complex has pushed China to engage beyond its own borders, to sustain its levels of economic growth, mostly in resource-rich areas as Latin America. Venezuela, possessing the largest amount of oil reserves in the world, is therefore considered by China as a logical option. Furthermore, Latin America has traditionally been considered the U.S. backyard. Therefore, Venezuela could be considered a strategic option by emerging power China as well, counterbalancing the U.S. Venezuela, welcoming to cooperate with China, has, however, been facing problems of their own in the form of an economic crisis, humanitarian crisis and a political crisis. This research focuses on the Venezuelan relations for the period 1999-2016, with a particular focus on

Sino-Venezuelan cooperation in the oil sector. Deriving from a radical geopolitics angle, examining the Sino-Venezuelan diplomatic, security, and trade, investment and finance relations, both geoeconomic and geopolitical components of the relationship are weighed. Whereas its increase in trade, investment and finance with Venezuela points to a geoeconomic logic, the expansion of diplomacy and security would suggest the Sino-Venezuelan relations being of a more strategic, geopolitical nature. The outlook of Sino-Venezuelan relations looks, as a result of Venezuela’s severe domestic problems in combination with an averse regional alliance led by the U.S., rather gloomy.

Keywords

China, Venezuela, CNPC, PDVSA, energy supply security, oil, radical geopolitics, geopolitics, geoeconomics, trade, investment and finance

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Chapter 1 – Research design

1.1 Overview of the research

1.1.1 Objectives and research question

The rise of China in recent decades from a developing country to one of the major economic powers is considered one of the key developments taking place in geopolitics. China’s exponential economic growth and the nature of this growth have led to a huge increase in the domestic consumption of energy sources to a stage that domestic production could not meet those levels. Among those energy sources, oil has been considered of major importance because of the application of oil in key economic sectors in China. Since China’s domestic energy production could not meet its fast growing

consumption, China needed to start acquire these natural resources beyond their own borders. China uses its national oil companies (NOCs) to carry out the activities to pursue this objective of energy supply security. The energy deals between Chinese NOCs and other countries are often accompanied by the diplomatic support of the Chinese state, and finance provided by Chinese state banks.

In order to comprehend these dynamics, this research aims to 1) clearly lay out the way the Chinese state uses both the NOCs and state banks to reach their endeavor of energy supply security.

In order to not be too dependent on a small amount of energy source suppliers, China has been following an energy strategy of energy supply diversification, which has led to a wide variety of countries across the globe supplying these resources. Almost all Latin American countries, as a continent possessing an abundance of resources, are among those countries that intend to push their economies forward with Chinese trade, investment and finance. Venezuela, as a country possessing the largest oil reserves of the world, has increasingly been engaged with the Chinese, nowadays supplying the largest amount of oil from all Latin American countries. This research, therefore, intends to 2) lay out the dynamics of the trade, investment and finance relations between China and Venezuela, and to examine the importance of China’s search for oil for those relations.

As mentioned above, the Chinese state often accompanies the oil deals closed by their NOCs, through political tools, such as diplomacy. It is, however, not entirely clear if this diplomacy serves the sole purpose of promoting its Chinese companies abroad, or if (geo)political considerations

accompany these Chinese diplomatic efforts. This research aims to 3) find out to what extent these geopolitical elements are indeed present in Sino-Venezuelan relations. .

Since China’s Going Out Strategy and China’s new position within global politics have led to a significant shift in the status quo in global geopolitics, and the way other countries respond to China. Many countries from across the globe have jumped on China’s economic bandwagon, to benefit from China’s huge trade, investment and finance capabilities. Venezuela, since the rise of the chavista regime, has been more than welcoming to the Chinese to replace the ‘imperialist’ U.S. to keep up their economy. Global players like Russia, the EU, and the U.S. are all counterbalancing China in their own ways. China’s engagements in U.S. backyard of Latin America have been considered as a threat

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to U.S. regional hegemony. Venezuela, with the U.S. as enemy, can be considered a natural ally for the Chinese counterbalancing the U.S..

Venezuela, however, has been facing their own problems with a quickly deteriorating

economy leading to a shortage of basic goods, such as food and medicines, subsequently resulting in a humanitarian crisis. Furthermore, Venezuela’s recent election has been widely condemned by the international community of states, as a result of sounds of democratic foul play and the incarceration of important opposition leaders. Venezuela’s domestic context, therefore, poses its own difficulties. A fourth objective of this research intends to 4) sketch the prospects for further Sino-Venezuelan

relations in the nearby future.

All things considered, this research wants to lay out the nature of the Sino-Venezuelan

relations by examining the diplomatic, TIF, and security relations between both countries. My research question, deriving from the above, is: What is the true nature of Sino-Venezuelan relations?

In order to be able to answer the main question to the fullest, it is necessary to answer the following set of sub-questions:

1. How do domestic factors determine China’s energy strategy abroad?

2. What domestic factors in host country Venezuela shape the context in which Sino-Venezuelan relations take place, as well as the activities of the CNPC in the Venezuelan oil industry? 3. How has Sino-Venezuelan cooperation in key areas as diplomacy, TIF, and security developed

since Chávez got to power in 1999?

4. What are the domestic and geopolitical challenges that form a risk for China’s energy supply security, and the activities of its NOCs, obtaining oil from Venezuela?

1.1.2 Social and academic relevance Social relevance

China’s rise and activities abroad are among the most covered news items. While many countries have been benefiting, there have also been a high amount of skeptics arguing that the Chinese intentions have collateral damaging effects on those host countries and the world in general. In addition, Venezuela’s domestic economic and humanitarian situation is continuously deteriorating. This

research helps to lay out to what extent China’s activities have those damaging effects on Venezuela’s domestic situation.

Academic relevance

Although a significant amount of work has been devoted to the concepts of state-market complex and geoeconomic and geopolitical logics, this research wants to connect them directly in a case-study. While the use of the concepts geopolitical and geoeconomic logic has been applied in case studies on the U.S., possessing a liberal state-market complex, these logics have, as far as I know, not directly

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been tested in a case study with the centralized state-market complex of China as point of departure. Therefore, it is interesting to test whether a) the geoeconomic and geopolitical logic are applicable to China’s centralized state-market complex; and b) if so, what logic prevails. In addition, the

geoeconomic and geopolitical logics have, to my knowledge, not been applied to Venezuela as host country before. This research is, therefore, as a result of its case study design, suited to add in-depth data on host country Venezuela. In addition, this research can provide in-depth information on the manner the Chinese state and its NOCs act and talk behind closed doors when engaging with other actors.

1.1.3 Delineation of research Actors

The main social entities examined in this research are the Chinese and Venezuelan state class, and their NOCs: CNPC and PDVSA. These state classes, as political elite, formulating all the countries’ policies and strategies and central in guiding their NOCs’ activities, are central to the entire research.

Timeframe

Although trade of crude oil only started in 2003 (OEC, 2018a; OEC, 2018b), China-Venezuela ties were strengthened again since Chávez became Venezuela’s president in 1999, through the

establishment of multiple commercial and economic agreements in the period 1999-2001. Since trade data for China was only available up till the year 2016, the study of the Sino-Venezuelan TIF

relations is only possible until 2016. Where possible, however, the research to investment and finance activities, as well as events in the diplomatic and security realms, is extended to as recent as possible (2018). This focus on most recent developments provides the research the crucial societal relevance.

Space

In terms of space, the primary focus of this study is on China and Venezuela. Since Venezuela is important in geopolitical terms for both Latin America and the Western Hemisphere (including both Americas), the geopolitical challenges are studied within this wider scope.

1.2 Literature review

This literature review will provide a structured overview of contemporary academic literature on the bilateral relations between China and Venezuela. This review will sketch a broad outline of the relations between the two countries by looking at the different views on the recent history of Sino-Venezuelan relations. By doing this, this review will address the strategic interests involved for China with regard to Venezuela, encapsulated in both the regional and global context. Since energy, and mostly oil, relations are crucial for the bilateral relations, towards the end of the review there will be a section that explicitly focuses on Sino-Venezuelan energy relations.

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Nature of Sino-Venezuelan relations

The recently strengthened Venezuela-China relations with increased oil trade as the principal activity between the countries has been picked up by scholars in recent years (Armony & Strauss, 2012; Rosales, 2016; Rios, 2013; Corrales, 2010; Romero & Martinez, 2016; Ellis, 2012; Corrales, 2015). The debate concerning the Sino-Venezuelan relations is largely focused on whether the cooperation is based on a shared ideology and shared values, or more on strategic, practical elements. Another part of the discussion focuses on to what extent China’s cooperation with Venezuela is part of a wider geopolitical strategy in Latin America, or should be solely viewed as deriving from pursuing economic gains.

On the one hand, multiple aspects of their shared values and ideology, partially based on non-western, liberal principles, are being seen as having created a mutual understanding, a solid basis for bilateral cooperation (Rios, 2013). Important aspects are the nationalist political culture,

non-interference in internal affairs, and international relations in general in a context of “fair, just, egalitarian and peaceful cooperation without precedence as required by an ideological alignment, the schemes of imperial domination, characteristic of the capitalist system” (Rios, 2013: 59). As argued by Rios (2013), “The Bolivarian socialism and the socialism with Chinese characteristics have in

common the attempt to provide a national response to the demands of modernization, development and social justice“ (60). However, China has been wary for being pulled into any ideological projects as proposed by Venezuela, deriving from their own experience with Mao, and prefers to stick to a pragmatic approach (Rios, 2013: 60; Corrales & Romero, 2013: 32).

These shared values are also shown through Venezuela and China’s shared position on several occasions in international forums like the Security Council of United Nations. This includes not supporting the accusations of human rights violations executed by western countries, backing up China in disputes with rogue states like North Korea and Iran, and supporting a Chinese effort opposing the dollar and in favor of an alternative international currency (Rios, 2013: 60).

On the other hand, Sino-Venezuelan relations are being seen as strategic (Corrales, 2010), and are very practical of nature. While Sino-Venezuelan is largely focused on oil trade, Sino-Venezuelan relations are known for their economic investments and lucrative deals (Corrales, 2015). This oil trade is accompanied by help from China in developing a Venezuelan fleet able to transport Venezuelan crude oil to China, building oil and drilling platforms, housing and railways (Rios, 2013: 54). Moreover, China is willing to provide the foreign direct investment necessary to relaunch the Venezuelan minery sector, has expressed interest in assisting Venezuela in enhancing its agricultural sector, and cooperation has been strengthened in the sectors of telecommunication and finance (Rios, 2013: 57-59). Another example of the good bilateral relations, is the creation of a Chinese-Venezuelan ‘Mao fund’ in 2009, assigned to social projects in Venezuela (Rios, 2013: 60), or the rise in exchanges and visits in tourism, culture, sports and education (Rios, 2013: 61).

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varies from the exchange of military personnel to China selling military equipment to Venezuela (Rios, 2013: 60-61). According to Rios (2013), “the military industry collaboration gains weight on the bilateral agenda” (60-61).

Sino-Venezuelan relations should, in the light of the strategic side of Sino-Venezuelan relations, also been considered in relation to the decreasing regional hegemony of the U.S. in Latin America (Armony & Strauss, 2012: 7). Another proposition, namely, is that China is increasingly active in the political realm in Latin America (Van de Maele, 2017). Venezuela, looking for a lesser dependence on the U.S., has welcomed the Chinese reconciliation with open arms (Corrales & Romero, 2013: 71-73). China’s surge has been considered as a chance to diversify markets and partners for energy export (Downs, 2006; Corrales, 2015). This is shown in practice by the fact that, since 2004, Venezuela’s crude oil flows towards North America started to decrease, whereas the oil flows towards Asia increased (Mijares, 2015). Moreover, China’s surge has also allowed for a reconstruction of foreign alliances (Corrales, 2015).However, as argued by Corrales and Romero (2013), China has “so far been unwilling to join in Venezuela’s “balancing act” against the United States (32).

On the same time, however, it has been argued that, during Maduro’s presidency, Venezuela has narrowed the oil diversification process, and has instead substituted it for a larger dependency on China (Romero & Mijares, 2016: 190). This larger dependency, partially through the conditionalities accompanying the oil-backed loans (Ellis, 2012), has led scholars to believe that China is increasingly hijacking the Venezuelan oil industry, and possibly the Venezuelan economy (Rosales, 2016). Other authors, however, have argued that oil-backed loans are in fact beneficial to both China and Venezuela (Gallagher et al., 2012; Armony & Strauss, 2012).

Although the political side of the bilateral relations are important, the economic gains are considered the key variable of the relationship (Rios, 2013; Corrales & Romero, 2013: 32). For Venezuela, China can provide them with the necessary investments to further develop their economy. For China, in turn, the energy relations are key for their broader economic and security activities on Venezuelan territory (Rios, 2013). Scholars have argued that the Sino-Venezuelan relations should be viewed as more complex and diverse than to simply assume an unequal relationship between the two (Rios, 2013).

As argued by Hoogenboom (2014), however, the bilateral relationship between China and Venezuela has received scarce academic attention, and should be exploited further. Therefore, this research wants to contribute to the debate whether China solely has interest in economic gains, or that it is also active in Venezuela out of strategic, geopolitical interests.

1.3 Theory and concepts

1.3.1 Orthodox geopolitics, critical geopolitics, and radical geopolitics

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taking place in the trade relations of Venezuela and the United States, and Venezuela and China. Geopolitics in its traditional form (“orthodox geopolitics”) emerged at the end of the 19th

century through scholars like Mahan (1890), Kjellen (1897) and Ratzel (1897), and has been further exploited by academics like Mackinder (1904, 1919), Haushofer (1932) and Spykman (1942). Geopolitics relates back to “imperial concerns with the links between geography, state territoriality, and world power politics” (Sparke, 2007: 339). Orthodox geopolitics, ignoring the geoeconomic side, focuses solely on the geopolitical realm: The competition between powerful states to control resource-rich territories, with the goal of enhancing their national security (Amineh & Yang, 2014: 28-29).

The school of critical geopolitics understood the need to reject this traditional use of the term geopolitics because of its “narrow concern with “national security” as the defining feature of

geopolitics and sought a wider context of social and human development, encompassing such concerns as poverty, violence, and environmental degradation” (Amineh, 2004: 7).

After the Cold War, realist Edward Luttwak (1990) argued that the economic competition between major powers marked a new era of interstate rivalry, giving room to geoeconomic arguments to explain the behavior of states within the international system. Geoeconomics is a widely used concept that ranges from “managerial concerns over the competitive economic positioning of states and cities (e.g., Schlevogt 2001) to the basic ‘‘post–Cold War’’ strategic notion that economic competition has now eclipsed military confrontation at the center of interstate relations (e.g., Cruz de Castro 2000)” (Sparke, 2007: 339). Although this paper adopts Luttwak’s assumption of economic competition currently being at the forefront of interstate rivalry, it ignores his purely state-centric approach. Following critical geopolitical thinking, this paper adopts the idea that “the relevant actors for analysis of the political-geographic world include not only states” (Amineh, 2004: 7).

There is one particular stream within critical geopolitics that adopts both these exact

assumptions applicable to this research: radical geopolitics. First, radical geopolitics started to add the geo-economic dimensions of global political economy as a defining feature of geopolitics (Harvey, 1985; Taylor, 1993; Amineh, 2004;Mercille & Jones, 2009; Amineh & Yang, 2014). This means, for example, that “the powerful geo-economic constituents of a state shape its geopolitical horizon and geostrategical interests” (Amineh & Yang, 2014: 32).

Second, radical geopolitics rejects the idea of state being the only actors, but includes others, like commercial actors, that are able to influence political and economic processes, or carry out significant activities.

Moreover as argued by Mercille (2008), radical geopolitics is able to offer the following:

“Critical, political economic analyses to investigate the “why” (the causes) of policy and political

events, without neglecting the “how” (the way they unfold). It examines the relative importance of the geopolitical and geoeconomic factors, or “logics,” that drive foreign policy and addresses questions that have been neglected by current approaches in geopolitics, a number of which fail to incorporate

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political economy or to identify the fundamental reasons behind foreign policy” (857). 1.3.2 Concepts of geoeconomic and geopolitical logic

Within radical geopolitics, Harvey (1985) makes the distinction, and simultaneously links them, between two logics that major state-actors follow when being engaged in cross-border activities: 1) a capitalistic logic of power, which “is about wealth creation and/or capital accumulation without boundaries as well as capital flows” (Amineh & Yang, 2014: 31) and 2) a territorial logic of power, which refers to the political power (including military power) within a state and between states (Amineh & Yang, 2014: 31).

Whereas Arrighi (1994) based both logics on state policies, whereas Harvey (2003) made the distinction between the territorial logic being explicitly linked to political activities of states (including political, military and diplomatic strategies), and the capitalistic logic connected to the processes of capital accumulation and the activities carried out by firms, i.e. “daily practices of production, trade, commerce, capital flows” (Harvey, 2003: 26-27). Harvey, however, does not always manage to make a clear distinction between the why (causes of policy) and the how of policy (nature of the

policies/strategies themselves) (Mercille, 2008: 576). Important to note is that both the causes of policy and the nature of the policies and strategies, can be political or economic (Mercille, 2008: 576). This means that both economic and political policies can be politically or economically motivated, or both (see figure 1.3.1).

Figure 1.3.1: Model relation causes for policy and nature of policies1

Causes for policy Nature of policies

Geopolitical Political

Economic

Geoeconomic Political

Economic

The logics, however, deriving from their importance for the formulation of policy, are referring to the causes of policy (Mercille, 2008: 576).

Mercille (2008) further clarifies Harvey’s distinction by referring to the capitalist logic as geoeconomic logic and the territorial logic as geopolitical. The geoeconomic logic refers to the tendency of capital to expand across the own country’s borders, and assumes a desire by capitalists to wish for policies that result in short-term gains, for example by maintaining good bilateral relations with a country interesting to invest in (Mercille, 2008: 577). Geopolitical logic, in turn, derives from the statesmen’s desire to maintain credibility at home (Mercille, 2008: 577). The two logics are “both

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interrelated and relatively inseparable” (Amineh & Yang, 2014: 31), as well as it being a relationship with “constant tension and conflict” (Amineh & Yang, 2014: 31). The constant tension derives from the logics of spatiality, since the accumulation of capital can take place in a cross-border setting, whereas the logic of power is based on “the management of populations through territorial configurations known as state power and the state apparatus” (Amineh & Yang, 2014: 31).

1.3.3 The concepts of state-market complex, SOEs, NOCs & CDB

The way the cross-border activity takes place, depends on the state-society/market complex, defined as “state-made institutions that connect markets at home and abroad” (Amineh & Yang, 2014: 498), present in the country. Although there is space for other actors, the state is “key institution-as-agent at the core of the state–society complex” (Underhill & Zhang, 2005:9).

Amineh and Yang (2014) explain further that “domestic state-market relations are part of growth promoting or growth restraining institutions of societies. Self-identifying, state-organized groups of humans subsist on and interact with each other within natural and mineral resource systems in their reach of mobility” (498). Since this research focuses on the relation between the Chinese state and its NOCs as a determinant for developments in trade, investment and finance in the oil industry, and less on societal forces, the concept of state-market complex will be central to this research.

Amineh and Yang (2017) make the distinction between a liberal state-market complex, on the one hand, and a centralized (or authoritarian) state-market complex, on the other hand (12-13). Corporations within liberal state-societies are privately owned which, to a certain degree, operate autonomously from the government (Amineh & Yang, 2017: 14). Furthermore, it could be argued that, strongly related to the geoeconomic logic, “business interests are dominant inputs in the

policy-making process, reflected in the “revolving between state and class” (Amineh & Yang, 2017: 13; Cox, 1981). Following from this, it has been argued that policies in liberal state-market complexes are strongly in line with the desire of capitalists to be engaged beyond its own borders and to enter new markets to increase its growth (Amineh & Yang, 2014: 32). Summarizing, following Amineh & Yang (2017), in liberal state-market complexes the underlying forces of capitalism should be considered the powerful geoeconomic constituents, which are to a significant degree able to influence the policies that determine the form of the cross-border activities to gain access to markets and resources to maintain the domestic power-wealth structures (32). Therefore, although political and business interests might conflict at times, following the above mentioned arguments, the political class in liberal state-market complexes often carries out policies that are in line with business.

In centralized state-market complexes, which has its origin in the concept of a Hobbesian contender state (Van der Pijl, 1998), “economics and politics are articulated in the bosom of the state” (Lefebvre, 1976: 36). Moreover, “civil society, based on social classes and forces, especially a business class, is non-existent, underdeveloped, or too weak to act independently of state power” (Amineh & Yang, 2017: 13). Although the Hobbesian contender state is known for its explicit focus

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on the national economy (Van der Pijl, 1998: 79), the centralized state-market complex concept encapsulates countries that follow a state-led development model, but also by engaging in cross-border activities (Amineh and Yang, 2014). As explained by Amineh and Yang (2014), “the sovereign state …. will, therefore, determine the long term, strategic orientation of society and the status of domestic social actors and the constraints on their capacity to articulate their interests in the transnational space dominated by advanced capitalist industrialized actors” (499).

The Chinese top leadership consists of high-level members of China’s state party CCP, which controls both power and social relations, and should therefore be considered the key “political and governing force of China’s political system” (Amineh & Yang, 2017: 20). The CCP’s undisputed position to govern China is also stressed in the PRC’s constitution (Amineh & Yang, 2017: 20). In the CCP, several organs constitute the leading decision-making structure within Chinese politics, such as the National People’s Congress (NPC Party Secretariat, the Politburo, and the Politburo Standing Committee (PSC). While, in theory, the NPC is supposed to be China’s leading body of state power, the actual decision-making power is exercised through the latter three organs (Amineh & Yang, 2017: 21). A special role is assigned to the PSC, which formulates policies and transmits them downwards to tens of thousands of intermediate bodies to take care of details and implementation (Amineh & Yang, 2017: 22). The individuals making up the inner-circle of state leadership are selected from the “leading cadres of the Party-State (that is the Central Committee of the CCP, the Political Bureau and its Standing Committee, and the PRC’s State Council)” (Amineh & Yang, 2017: 21-22), but includes for example also individuals members from main economic sectors, such as managers of SOEs (Amineh & Yang, 2017: 22).

The corporations within a centralized state-market complex should be perceived as always being subject to a certain degree of control from the government. The strategy of governments in a centralized state-market complex is to create major domestic companies and, subsequently, guide their expansion across borders (Amineh & Yang, 2014: 500).

This is especially the case for energy companies that “are often agencies of state power or can be viewed as forms of state-owned enterprises (SOE) in one form or another” (Amineh & Yang, 2014: 500). The transnationalization of these same energy companies can, however, lead to the loss of a certain extent of control from the government over the operations of these SOEs (Amineh & Yang, 2014: 500). However, as argued by Meidan (2016a) in an example on China, the people leading the businesses and the political elite in general have the same interests and are all part of the same state class. Concludingly, cross-border activities from liberal state-market complexes are largely initiated by business’ interests, whereas for centralized state-market complexes these same activities are largely state-led.

NOCs are SOEs in the oil industry, which perform a strong role within the global oil industry, owning 73% of the global reserves and 61% of production (Victor et al., 2012: 3). NOCs, despite their common name, do play many different roles. Some of them do resemble their IOC counterparts in

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their activities, and some others performs social and/or political tasks next to their commercial role that are normally governments’ tasks (Victor et al., 2012: 3). The functions of NOCs can range from advancing national pride, the redistribution of income, and the promotion and control of economic development; to NOCs being valuable political instruments; and to a country’s direct control over their resources through the state’s ownership of the firm (Victor et al., 2012: 9). However, studies have shown in case studies that “politically powerful NOCs have mostly been forming in bigger, organized resource sectors over which the state bureaucracy can exert little regulatory control, or has a low amount of knowledge. On the other hand, there have also been a sufficient amount of cases where the government has been able to keep their NOC at arm’s length (Victor et al., 2012). In China, despite several periods in recent history of more freedom to maneuver for the NOCs, the latter case is applicable (Meidan, 2016a).

In this research, therefore, NOCs should be seen as created by the state. Following Victor et al. (2012), “governments created them in an effort to take more control over the development of their oil and gas resources and retain more of the revenues from those activities for themselves (23).

Chinese NOCs need to receive funds from state banks like the Chinese Development Bank (CDB) or the China Exim Bank. The CDB, the sole Chinese bank active in Venezuela, therefore, plays an important facilitating role that needs to be outlined. Among the CDB’s operations, active in the international realm since 2000, are 1) providing credit to construct oil and natural gas pipelines; bankrolling foreign investments of Chinese energy and mining corporations, 3) the provision of credit to overseas energy and mining companies (Alves, 2013: 100). Although the CDB’s main goal is to serve the interests of the Chinese state, there has still been room for maneuver to target their second large objective of pursuing profits (Downs, 2011: 45).

1.3.4 The concepts of energy security, resource scarcity & oil

Although it has been recognized that energy security has a different meaning for different countries (Müller-Kraenner, 2007), the concept of global energy security in broad terms be defined as “the influence of geo-graphical factors, such as the distribution of centres of supply and demand, on state and non-state actions to ensure adequate, affordable and reliable supplies of energy” (Bradshaw, 2009: 1921). The objective of energy security, according to Yergin (1988), “is to assure adequate reliable supplies of energy at reasonable prices and in ways that do not jeopardize major national values and objectives” (111). Yergin (1988) argues that “the focus of energy security concerns is on the shocks, interruptions, disruptions and manipulations of supply that can lead to sudden, sharp increases in prices and can impose heavy economic and political costs” (112).

Major states as the U.S. and China do not have a sufficient amount of energy sources on their own territory. This limited amount of domestic energy supply is called resource scarcity. Despite the significant growth of renewable energy sources in recent decades, fossil fuels are still the dominant energy source worldwide (Amineh & Yang. 2017: 17). Since there is only a limited global supply of

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fossil fuels, these developed economies are increasingly involved in a global competition for these fossil fuels beyond their own borders to secure their energy supply (Amineh & Yang, 2014: 506).

This resource scarcity can take three different forms, namely: 1) Demand induced scarcity, 2) supply induced scarcity, and 3) structural scarcity (Amineh & Yang, 2014: 507-508). Demand induced scarcity, firstly, is mainly the result of the three following causes: 1) “The first is population growth in consuming countries. The second is rising per capita income, which means the major per capita consumers in advanced industrialized countries and regions and in late industrializing economies, particularly in South and East Asia (mainly China and India), where the bulk of the world population lives. Third is the price of substitutes” (Amineh & Yang, 2014: 507). Supply induced scarcity, secondly, “is caused by the dwindling of reserves that can be exploited with current technology and at a given market price” (Amineh & Yang, 2014: 507). Thirdly, structural scarcity is scarcity being “supply-induced by the deliberate action of a major industrialized power, or by producer cartels, such as the Organization of Petroleum Exporting Countries (OPEC), by the powerful state-led National Oil Companies of resource-rich countries” (Amineh & Yang, 2014: 508). It can, however, also be induced by a “major power that manages to gain control of conditions of stock-access for thirds has the option of inducing scarcity in them” (Amineh & Yang, 2017: 19).

As has been pointed out by Alhajji (2007) the concept of energy security is limited to oil, by both policy makers and academics. Oil plays this major role for two reasons, namely 1) it is by far the key resource providing energy for the industrial world, for which, concerning transport, there is no large-scale ready substitute, and 2) the large distance between supply and consumer markets makes oil subject to military and political struggles for its control, and is largely tied to national power and nationalism (Yergin, 1988: 112).

One of the common measures for countries to improve their energy security is the

maintenance with or the control of oil companies based in the import countries (Vivoda, 2010: 2). Vivoda (2010) explains that “given that energy security has a different meaning for different countries, it is logical that reliance on international oil companies (IOCs) or national oil companies (NOCs) to enhance energy security is assigned a different level of importance in their energy security strategies and/or policies” (2).

1.3.5 The concepts of lateral pressure, power projection & Going Out Strategy

A concept that can well explain the reason for cross-border engagement, is the concept of lateral pressure. Lateral pressure can be referred to as “the “build-up of socio-economic forces released by market actors” (Amineh & Yang, 2014: 509), faced by the government from societal and economic forces. As Amineh and Yang (2014) explain, “These social forces induce incentives in governments under stress to expand beyond borders as the capability to do so improves in absolute and relative terms (510). Identified factors leading to an increased level of lateral pressure are technological change, rise of income, unfulfilled demands leading to social pressure and population growth (Amineh

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& Yang, 2014: 510). For China, factors identified that are leading to lateral pressure are 1) rise of income among the population (Amineh & Yang, 2017: 18), and 2) unfulfilled demands leading to social pressure (Amineh & Yang, 2017: 23). Governing elites have an interest of their own meeting those unfulfilled demands to “keep order at home and to protect the state against competitors in the international system” (Amineh & Yang, 2017: 23).

This lateral pressure in combination with its resource scarcity are pushing China to project their power. Power projection should be defined as cross-border activity connecting “domestic society and its institutions …. to the external world” (Amineh & Yang, 2014: 501). Amineh and Yang (2014) argue that power projection has a two layered objective, namely 1) the establishment of “control over trade flows, strategic investment and transport routes regarding industrial inputs from fixed-stock mineral and metal deposits available in the world” (514), and 2) the protection of the domestic wealth-power structure (514). When specifying to energy security, wealth-power projection implies the creation of “routes abroad to access stocks of minerals and protecting them, either by force or by peaceful cooperation” (Amineh & Yang, 2017: 27).

The activity of power projection fits in with China’s ambition “to gain a larger share of the world’s economy and resources by its Going Out Strategy” (Amineh & Yang, 2017: 23). The PRC’s Going Out Strategy has been described as a combined effort of pursuing natural resources abroad in combination with the internationalization of Chinese businesses (Xu, 2017: 67). Furthermore, China has, unlike the U.S., been argued to increasingly “utilize economic instruments to achieve geopolitical ends” (Troxell, 2018: 7). This is in line with the changing focus of national security strategies on economic security, rather than the focus of traditional security strategies being mostly on military strength (Troxell, 2018: 7).

1.3.6 Conceptual model of geopolitical economy

This section connects the concepts just laid out in the previous sections by presenting a conceptual model of Geopolitical Economy (See Figure 1.3.1 -- Amineh, 2018). This model is used as a compass throughout the entire research.

The Chinese political elite determines in China’s centralized state-market complex the direction of the country’s development through their policy framework. This concerns both activities taking place within the Chinese borders by social forces, as the activities of Chinese enterprises beyond their own borders. Since the Chinese SOEs are always subject to control by the Chinese elite, as part of the political elite and business leaders being part of the same state class, the NOCs’ policies and activities can always be expected to be in line with the interests of the Chinese state class. China’s lateral pressure, deriving from the income rise of its population and the social pressure of unfulfilled demands, has pushed the Chinese state to engage more and more outside their own borders. The current pace of China’s economic growth, a crucial condition for the protection of its domestic

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power structure, can only be sustained through sufficient levels of energy sources (Amineh & Yang, 2017: 11)..

Figure 1.3.2: Conceptual Model of Geopolitical Economy

Source: Amineh, 2018

Since China is subject to demand induced resource scarcity, it needs to resort to the imports of energy sources. China’s engagements abroad are largely pushed by its energy policy of import diversification. In addition, since no state allows other states to take direct control over another country’s natural resources, China needs to project its power to ascertain itself of sufficient supplies of energy for the foreseeable future, as well as to be able to expand its capital without losing control. Therefore, China’s considerations to engage abroad can assumed to be both geopolitical and geoeconomic in nature.

Both energy policies and power projections are expressed through China’s bilateral and regional diplomacy and security relations, as well as the trade, investment and finance activities carried out by its SOEs in the host country. Moreover, these activities also have their political and economic effects on the host country.

In addition, all of these diplomacy, security and TIF activities between countries result in political or economic alignments of ties, such as the Belt and Road Initiative (BRI); Shanghai

Cooperation Organization (SCO) or the North Atlantic Treaty Organization (NATO). However, these activities and those structures lead, as a result of countries having different interests or fighting for economic or political dominance, to friction in the regional and global spheres. Furthermore, the domestic factors in host countries have the ability to change the broader geopolitical context; and the geopolitical context has the ability to shape the actions and structures in the host country.

In the end, the perceptions of threat and opportunity deriving from those domestic factors and wider geopolitical context determine major states actions in the future.

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Master Thesis The Political Economy of Energy 2017-2018 Jim Beerepoot 1.4 Brief argumentation and hypotheses

As shown by the conceptual model, the Chinese state faces lateral pressure that forces the Chinese leadership to protects its wealth-power structure by sustaining the levels of economic growth. China’s resource scarcity requires the PRC to import a significant amount of natural resources from countries across the world, such as resource-rich Venezuela. The Chinese leadership projects China’s power by moving its SOEs to engage in other countries by controlling strategic investment, trade flows, and transport routes of industrial inputs from metal and fixed-stock mineral deposits to secure itself of energy supply for the foreseeable future.

Despite literature pointing to China’s broader economic activities in Venezuela, in areas as agriculture and telecommunication, the literature pointing to China’s increased oil imports and construction activities relating to oil, in combination with the argument above, have convinced me to pose the following hypothesis:

H1: China’s need for energy sources is the main driver for the activities of Chinese SOEs in Venezuela

Based on the literature of the subject, it has been argued that the Chinese have increasingly been cooperating with Venezuela in a broad array of areas, including opening up diplomatic channels and militarily engaging with one another. When perceived in the wider geography of Latin America, China’s diplomatic and military engagements in Venezuela can be seen in the light of

counterbalancing the regional hegemon: the U.S. However, the literature also suggested that China does not have the desire to oppose the U.S. in its own backyard. It seems, therefore, for now, illogical that China wishes to increase its presence in Latin America to such an extent that it counterbalances the U.S.. The expectation, therefore, is that China has no further geopolitical motives for engaging on Venezuelan soil other than securing oil. This leads me to formulating the following hypothesis:

H2: China has no particular geopolitical interest in Venezuela, such as counterbalancing the U.S. in the LAC region, other than oil

1.5 Operationalization

First of all, despite Venezuela playing an important role in its role of host country, this research focuses on the Chinese activities on Venezuelan soil. This means that the Venezuelan state and its national oil company PDVSA are important actors in their roles as engaging with the Chinese state, CNPC and CDB in the Sino-Venezuelan diplomacy, TIF, and security activities, but not the point where this research departs from.

As a starting point for this research, the unit of analysis is identified in the form of the Chinese state-market complex. As indicated above, the Chinese state guides its market and society in a

centralized, authoritarian model, and should therefore be considered the main actor. Furthermore, the Chinese state is controlled by a political elite, consisting of high-level CCP members, which will,

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Master Thesis The Political Economy of Energy 2017-2018 Jim Beerepoot when appropriate, be specified by calling them the Chinese leadership.

This means that, unsurprisingly, the Chinese state is the main actor in its diplomacy and security activities, but also guides the CNPC and CDB in their trade, investment, and finance

activities. The nature of those activities is determined through the policies formulated by the Chinese state. This means that, also the TIF activities of CNPC and CDB, need to be seen in the larger policy framework carried out by the Chinese state. Concretely, it uses their diplomatic and security-related policies, the economic tools of the CNPC, and the financial tools of the CDB to project their power beyond their borders to secure their energy supply.

In order to identify the application of those tools, the trade and investment activities of Chinese companies, with a particular focus on CNPC, and finance activities of Chinese credit suppliers, with a particular focus for CDB, are examined to study the nature of Chinese TIF on Venezuelan soil. To operationalize trade, investment and finance, the model applied by Urdinez et al. (2014) will be used. The trade part will be covered by both the total and oil (crude oil combined with petroleum products) imports of China, as well as the Chinese exports to sketch the grown inequality. Chinese investment will be measured through the foreign direct investment (FDI) of China in Venezuela. Chinese finance will be examined through the different loans (including the nature of its conditionalities) they have provided Venezuelan companies.

Concerning the diplomacy activities between the PRC and BRV, 1) an overview is provided of the major bilateral agreements; 2) the exchange of high-level state officials; and 3) additional evidence of increased Sino-Venezuelan diplomatic ties. With regard to the security relations between the BRV and the PRC, 1) the array of joint activities is studied, as well as 2) Venezuelan arms acquisitions from China; and lastly 3) an overview of meetings between high-level military officials.

Furthermore, for this research, it is of the utmost importance to define what is part of

geoeconomic and geopolitical logics, in order to be able to argue whether geoeconomic or geopolitical arguments are more important in determining the nature of Sino-Venezuelan relations.

As mentioned above, the geoeconomic logic refers to the tendency of capital to expand across the own country’s borders. As operationalized by Mercille (2008), “geoeconomics points to the flows of trade, finance and capital over global space and across borders” (576).

Geopolitical logic, in turn, derives from the statesmen’s desire to maintain credibility at home, (Mercille, 2008: 577). Whereas Mercille’s definition normally applies to a liberal state-market

complex where the statesmen can be dismissed during the next elections, this is not the case for a centralized state-market complex, such as the Chinese. The geopolitical logic of Chinese statesmen to maintain that credibility at a domestic level, however, concerns sustaining the same level of economic growth, for example by securing the natural resources needed to maintain this level of economic growth.

In order to carry out a risk analysis to identify further challenges for the Sino-Venezuelan relations with a focus on oil, and the activities of its NOCs on Venezuelan territory, the types of

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challenges are divided through a model suggested by Amineh (2018). The challenges can identified to be part of one of the following factors: a) political; b) societal (relation government with the people); c) cultural; d) economic; and e) ethno-religious.

1.6 Data & methods

To conduct this particular case study on the Sino-Venezuelan relations, both primary and secondary sources are analyzed and applied.

In order to provide accurate numbers and analysis on China’s (projected) energy situation, primary sources are analyzed, such as databases and annual reports from 1) U.S. Energy Information Administration (EIA), International Energy Agency (IEA), and British Petroleum (BP). Then, for the study of China’s energy policymaking process; the relations with CNPC and CDB; and its energy strategy, mostly secondary sources are used in the form of articles from peer-reviewed journals as Journal of Contemporary China and China Quarterly, books as Victor et al. (2011) and Amineh & Yang (2017), and book chapter as Jiang (2011). Another important source are working papers from the Oxford Institute for Energy Studies.

For the study on Venezuela’s political and economic structures; and the Venezuelan state’s relation with the PDVSA, mostly secondary sources are used. This entails mostly books, such as De La Pedraja (2016), Corrales & Romero, (2013), Hellinger (2012), a book chapter from Hults (2011), and articles from peer-reviewed journals, such as Journal of Democracy. Some additional information is provided by publications from the PDVSA itself.

To provide an accurate overview of the energy situation in host country Venezuela, reports will be examined from the Energy Information Administration (EIA), and statistical databases like the ‘B.P. Statistical Review of World Energy’ reports published between 2007 and 2017 will cover the numbers for the examined period.

In order to study the trade, investment and finance in the oil industry between China and Venezuela, this research will use data from a set of different databases: a) The trade data is provided by the Observatory for Economic Complexity (https://atlas.media.mit.edu/en/); b) investment data derives from the ‘China Global Investment Tracker’, supplied by the American Enterprise Institute & The Heritage Foundation (http://www.aei.org/china-global-investment-tracker/); and c) Chinese credit will be accessed through the China-Latin America Finance Database from the Inter-American

Dialogue (https://www.thedialogue.org/map_list/).

For the study of the Sino-Venezuelan diplomacy and security relations, this research will analyze official documents from the Chinese state and its Ministry of Foreign Affairs

(http://www.fmprc.gov.cn), as well as documents from the Venezuelan state and its Ministry of External Affairs (http://mppre.gob.ve) accompanied by secondary sources as Sun (2012) & Xu (2016). The data on Venezuelan arms acquisitions from China derives from the Stockholm International Peace Research Institute (https://www.sipri.org/databases). For the analysis of the relations between the

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CNPC and PDVSA, mostly news releases from the companies and leaked files from the U.S. embassy in Caracas, published by Wikileaks, are used.

Then, by analyzing secondary data from research institutes, such as Inter-American Dialogue, Global Americans, Brookings, or peer-reviewed journals such as Foreign Affairs, Naval War College Review, Asian Journal of Latin American Studies this research intends to lay out the larger

geopolitical role China plays in Latin America, as well as the role of the U.S..

To support this research, and provide as much social relevance as possible, data is used from a wide array of media in the form of daily news publishers as New York Times, Bloomberg, Reuters, South China Morning Post, NPR; or weekly news publishers as the Economist.

This research uses a case-study design to be able to lay out the true nature of the Sino-Venezuelan relations. A case study design allows to reveal the complexity of these Sino-Sino-Venezuelan relations, to delve deep into an examination of the setting (Bryman, 2008: 54). While a case study can be both deductive and inductive, depending on whether it is a quantitative or qualitative research strategy, this research maintains a deductive approach (Bryman, 2008: 54-55). The conceptual model of geopolitical economy laid out the theory on China’s engagements abroad, stating both geopolitical and geoeconomic motivations guide the Chinese state beyond their own borders. The critical case of Venezuela serves as a pivot to investigate the host country’s domestic environment, and the

geopolitical context that shapes China’s motivation to engage in Venezuela. The framework of radical geopolitics helps to accurately weigh the geopolitical and geoeconomic components comprising these bilateral relations, by studying the policies, in both the contexts of a domestic environment and the wider geopolitical arena. Furthermore, it is necessary to stress that this research does not intend to provide a definite answer to whether geoeconomic or geopolitical logic prevails in China’s intentions to engage abroad in general. Merely, this case study research desires to lay out the nature of Sino-Venezuelan relations, deriving from a radical geopolitics theoretical framework.

Furthermore, this research uses a mixed-methods approach to understand the Sino-Venezuelan relations, which is needed to tackle the weaknesses that are present in both quantitative and qualitative case-study designs. In order to reach the causal inference desired for a research as this (Brady & Collier, 2010), both qualitative and quantitative elements will be applied. The quantitative part of the research mainly takes the form of descriptive statistics to provide the numbers and show the

development in trade, investment and finance patterns between China and Venezuela in relation to oil. Following Toshkov (2016), descriptive statistics “summarize the data, instead of using the data to learn us something about the population the data represents”.

Although quantitative analysis does “provide social scientists with powerful tools for

assessing causation” (Dunning, 2014: 24), pieces of information are needed that “give crucial insights into causal processes of interest” (Dunning, 2014: 24). Qualitative tools are, therefore, desired to support the quantitative model. As formulated by Dunning (2014),

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The formulation of questions, discovery of strong designs, and validation of models require auxiliary information, which typically does not come from analysis of large data sets. This depends instead on disparate, qualitative fragments of evidence about context, process, or mechanisms (1-2).

Process tracing, defined as “the analysis of evidence on processes, sequences, and conjunctures of events within a case for the purposes of either developing or testing hypotheses about causal mechanisms that might causally explain the case” (Dunning, 2014: 2), is such a qualitative research method that can provide the in-depth, causal dimension a research question within social sciences desires (Dunning, 2014: 24). Collier et al. (2010) refers to these pieces of diagnostic proof, which follow these analyses, as “causal-process observations” (CPOs). Since this research focuses on a period from 1999 to 2016, examining the development of trade, investment and finance patterns, as well as the diplomacy and security relations from 1999 to 2018, the research method of process tracing suits the research objective. As explained by Collier (2011), “the descriptive component of process tracing begins not with observing change or sequence, but rather with taking good snapshots at a series of specific moments” (824). Moreover, as shown by Collier (2011), process tracing encompasses a wide set of data sources, ranging from quantitative data to qualitative sources, including both primary and secondary sources (825).

A major difficulty process-tracing faces, is that “the value of a particular causal-process observation a researcher presents must be set in the context of other information, including possibly disconfirming evidence” (Dunning, 2014: 25). Therefore, only when such information is elicited and presented, and it might be difficult to collect this type of information, its relative importance can be assessed by the research community (Dunning, 2014: 25). Solutions to this problem is the application of 1) more transparent cataloguing practices (i.e. posting of archival documents and transcribed interviews, and the insertion of active citations), and 2) “facilitation of scholarly contestation of process tracing claims” (Dunning, 2014: 25).

1.7 Structure of the thesis

After this chapter ends, chapters 2 and 3 of my thesis need to be perceived as the backbone of the rest of thesis, in the sense that it provides the context my research departs from.

Chapter 2, to start with, will provide the logic for China’s energy strategy beyond their own borders by providing the domestic context of China’s energy situation and the decision-making structure surrounding energy policies. Furthermore, in chapter 2, the Chinese energy policymaking processes, the way the Chinese state class uses its NOCs and state banks by looking specifically at the CNPC and CDB serve the purpose of introducing the actors active in pursuing China’s energy strategy in Venezuela.

Then, in chapter 3, host country Venezuela is analyzed to provide the context of the political and economic structures in the host country China is active in. Furthermore, the a) political economic structures; b) Venezuelan energy situation; and c) the PDVSA’s role in the Venezuelan oil industry are