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China is bailing out the world’s teetering oil producers

Oil-exporting nations are facing budget crises, political instability and social upheaval thanks to the cratering of crude oil prices in recent weeks. Enter China. Despite an economic slowdown of its own—which has been a factor in plunging oil prices—Beijing is stumping up billions of dollars in loans to many of these countries, in exchange for what some analysts warn are tough terms that could cripple future economic recoveries.

China’s lending could reshuffle the global balance of power, and ultimately threatens to make the World Bank and the IMF obsolete—but could also leave China with billions in defaulted loans if these countries can’t pay. China has been making a particular effort to build its influence in Latin America, long a US sphere of influence, and is holding a forum with 33 Latin American and Caribbean countries in Beijing this week. Chinese president Xi Jinping pledged this week China would make $250 billion in investments in the region over the next 10 years.

In most cases, the exact terms of secured loans and investments from China are not public, which makes it impossible for global markets and investors to determine the collateral behind them, or what happens if these already vulnerable nations default. But here’s what we know:

Venezuela

Thanks to disastrous fiscal policies and falling oil prices, the nation is in a deep recession, and is teetering on the verge of bankruptcy. China took some of the pressure off this week, by extending an additional $20 billion in investments to president Nicolas Maduro during his Jan. 7 visit to Beijing. The $20 billion is committed to specific projects, analysts believe.

A massive loan could be next—Maduro was set to discuss an emergency loan with Chinese president Xi Jinping that could be as large as $16 billion, Venezuela’s Nuevo Herald reported on Jan. 6 (link in Spanish), citing an analyst at Inter-American Trends. China is reportedly pushing tough terms—a loan of that size could require Venezuela to increase oil exports to China by 20% to 100,000 barrels a day, the paper said. At the end of 2013, the most recent figures available, Venezuela had borrowed more than $50 billion from China.

Venezuela desperately needs more cash. The country’s fiscal situation is “unsustainable,” Inter-American Trends wrote (link in Spanish) in a recent research report, and the country faces a “social explosion” that could ultimately result in Maduro being ousted. China, already “heavily exposed” to Venezuela, is likely concerned about regime change, research house Eurasia Group said in a note to clients (paywall).

Ecuador

China’s banks and state funds just extended an additional $7.5 billion in loans and credit lines to Ecuador, Ecuadorean officials said on Jan. 7 in Beijing. The package for OPEC’s smallest member includes a $5.3 billion credit line for 30 years, and loans from Chinese banks to fund education and conversion of households to natural gas.

Even before these loans, Ecuador had borrowed more than $12 billion from China, and funds from China covered about 60% of Ecuador’s funding needs, and more than 90% of its oil exports were pledged to China. Ecuador is under pressure to clear huge swathes of Amazon forest to satisfy agreements with Chinese mining firms.

Russia

When Western nations were sanctioning Russia over its belligerent behavior in Ukraine, China stepped in and strengthened energy ties, a move that follows the landmark signing of a $400 billion natural gas deal in May. In late December, officials in Beijing went even further, pledging economic support to prop up Russia’s ruble, which might include direct loans and infrastructure investment. No concrete plans have been announced.

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