The Chinese government is so far showing no sign of curtailing its oil ties to Venezuela, despite state-owned PetroChina’s rescheduling of Merey crude loadings in August.

Argus has confirmed that state-owned PetroChina’s trading arm ChinaOil rescheduled up to seven VLCCs of heavy sour Merey in August that had been set for delivery in October.

Venezuela’s political opposition and the White House swiftly seized on the move to declare that Beijing was abandoning the Venezuelan government of President Nicolas Maduro in response to US sanctions aimed at removing him.

Chinese companies are indeed sensitive to potential blowback from the US financial and oil sanctions on Caracas. Chinese engineering firm Wison, for example, has denied repeated Venezuelan government assertions that it agreed to repair PdV’s refineries under a barter deal for supply of asphalt, fuel oil and petroleum coke.

But the pause in PetroChina’s liftings in August appears to be a short-term commercial move stemming from broader market dynamics, rather than an indication that Beijing is rethinking its support for the Maduro government or cosying up to Washington to ease their trade war. The September loading schedule is not yet available.

China and India are taking turns as the main destination for Venezuela’s crude exports since the US cut off purchases under a broad oil sanctions regime imposed in late January 2019. China imported 340,000 b/d of Venezuelan crude in the first half of 2019, just shy of the 350,000 b/d average a year earlier.

ChinaOil lifts the Venezuelan crude mostly as payment for around $60bn in oil-backed loans that the Chinese government has extended to Caracas since 2007. The company resells part of the Venezuelan crude to Chinese independent refiners, but those refiners are free to source feedstock from other companies as well, such as Russian state-controlled Rosneft, PdV’s other big oil-backed creditor.

These market forces inside China could help to explain why ChinaOil reprogrammed the August loadings.

Most of the Venezuelan crude that Rosneft lifts is destined for its Indian refining subsidiary Nayara Energy, which operates the 400,000 b/d Vadinar refinery.

India’s Reliance Industries (RIL), which has US operations, has stopped importing Venezuelan crude in response to the US sanctions, even though these do not have any direct secondary component.

The main market alternatives for Venezuelan crude are Colombian Castilla Blend, Mexican Maya and Western Canadian Select (WCS) or like-quality Cold Lake, which offer buyers more reliable supply and consistent quality compared with Merey, which is nominally pegged at 16° API. Trading firm Mercuria is scheduled to deliver at least 2mn bl of Cold Lake to China in October.

Inside Venezuela, PdV has struggled for months to sustain crude production and export logistics in the face of the extensive suite of US sanctions. But the company has managed to stabilize output at around 750,000 b/d in recent months, partly with Chinese help.

Beyond debt service, China’s enduring oil ties to Venezuela are part of its global Belt & Road campaign based on long-term investment in natural resources and infrastructure. In Venezuela, this strategy is embodied by PetroSinovensa, a heavy crude blending joint venture between PdV and its minority partner CNPC, the parent company of PetroChina.

The joint venture, based at the Jose industrial complex on the coast of Anzoategui state, is undergoing a capacity expansion from 130,000 b/d to 165,000 b/d, with the goal of reaching 230,000 b/d in 2021 and eventually 330,000 b/d.

The project blends 8°-10° API crude from the Orinoco heavy oil belt with Venezuelan domestic light grades, including 30° API Mesa and 42° API Santa Barbara. Earlier this year PdV imported a cargo of Nigerian light sweet Agbami for blending to top off limited domestic production and sustain blending.

The PetroSinovensa expansion project contrasts with PdV’s other integrated heavy crude joint ventures which are stalled except for the 210,000 b/d PetroPiar venture with minority partner Chevron. PdV has stopped upgrading Orinoco crude at PetroPiar in favour of less complex blending to produce more Merey for the Asian market.

But renewed operations there could prove fleeting if Chevron is forced to pull out in late October because of the US sanctions.