Not Only American Companies Are Involved in Restoring Venezuela’s Power System

According to Bloomberg, Venezuelan authorities plan to bring one of the units at the large Planta Centro power station—located 135 km from the country’s capital, Caracas—back online soon. The station has been almost entirely out of operation for many years. The project is an important step toward restoring the country’s severely deteriorated power system. China Machinery Engineering Corp., a Chinese company specializing in international engineering projects involving the construction of thermal and hydroelectric power plants and other energy facilities, is taking part in the project.

Venezuela’s power system has long lacked adequate funding and necessary maintenance because of U.S. sanctions. As a result, many power plants are in poor condition, and parts and components are removed from other facilities and brought in to repair them. Resuming operations at Planta Centro could reduce the number of recurring power outages, which became especially frequent after the earthquakes in June this year. Work at Planta Centro is part of a large-scale program of repairs to Venezuela’s electricity infrastructure, which is wholly owned by the state-owned power company Corporación Eléctrica Nacional SA.

A reliable power supply is critically important to the oil sector, the foundation of Venezuela’s economy. Oil production currently depends on the country’s main power grid, although under newly adopted laws, oil companies are required to install their own generators.

After the arrest of former Venezuelan President Nicolás Maduro, the U.S. administration assigned American companies the primary role in repairing the country’s energy infrastructure, to ensure they have direct access to electricity. These companies include Chevron Corp., GE Vernova Inc. and North American Blue Energy Partners Inc. European and Latin American companies are also operating in Venezuela, including Repsol SA (Spain) and Impsa SA (Argentina).

In this context, the Chinese company’s involvement in the repair work warrants particular attention, given the current U.S. administration’s efforts to limit China’s influence in Venezuela. The Chinese company’s presence may be explained, on the one hand, by the fact that it is working at Planta Centro under a contract signed back in 2010, during Hugo Chávez’s presidency, and, on the other, by the fact that U.S. President Donald Trump does not want to strain relations with China’s leadership over the issue. Moreover, restoring Venezuela’s electricity infrastructure—even with the involvement of companies from a rival country—serves the strategic national interests of the United States.

Author: Doctor of Economics, Professor in the Department of World Economy and International Finance at the Financial University under the Government of the Russian Federation, Igor Alekseevich Balyuk.