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China's Oil Diplomacy in Latin America

BOGOTÁ, Colombia, Feb. 28 - Latin America is becoming a rich destination for China in its global quest for energy, with the Chinese quickly signing accords with Venezuela, investing in largely untapped markets like Peru and exploring possibilities in Bolivia and Colombia.

China's sights are focused mostly on Venezuela, which ships more than 60 percent of its crude oil to the United States. With the largest oil reserves outside the Middle East, and a president who says that his country needs to diversify its energy business beyond the United States, Venezuela has emerged as an obvious contender for Beijing's attention.

The Venezuelan leader, Hugo Chávez, accompanied by a delegation of 125 officials and businessmen, and Vice President Zeng Qinghong of China signed 19 cooperation agreements in Caracas late in January. They included long-range plans for Chinese stakes in oil and gas fields, most of them now considered marginal but which could become valuable with big investments.

Mr. Chávez has been engaged in a war of words with the Bush administration since the White House gave tacit support to a 2002 coup that briefly ousted him. Still, Venezuela is a major source for American oil companies, one of four main providers of imported crude oil to the United States, inexorably linking the two countries' interests.

Analysts and Venezuelan government officials say those ties will not be severed, as Venezuela is a relatively short tanker trip from the United States and Venezuelan refineries have been adapted to process the nation's heavy, tar-like crude oil.

"The United States should not be concerned," Rafael Ramírez, Venezuela's energy minister, said in an interview, "because this expansion in no way means that we will be withdrawing from the North American market for political reasons."

In recent months, though, China's voracious economy has brought it to Venezuela, and much of South America, in search of fuel.

"The Chinese are entering without political expectations or demands," said Roger Tissot, an analyst who evaluates political and economic risks in leading oil-producing countries for the PFC Energy Group in Washington. "They just say, 'I'm coming here to invest,' and they can invest billions of dollars. And obviously, as a country with billions to invest, they are taken very seriously."

China's entry is worrisome to some American energy officials, especially because the United States is becoming more dependent on foreign oil at a time when foreign reserves remain tight. It was the limited supplies that pushed a barrel of oil to $55 in October, driving up retail prices and hurting economies. On Monday, crude oil for April delivery settled at $51.75 in New York, up 26 cents.

The Senate Foreign Relations Committee, headed by Richard G. Lugar, Republican of Indiana, recently asked the Government Accountability Office to examine contingency plans should Venezuelan oil stop flowing. Chinese interest in Venezuela, a senior committee aide said, underlines Washington's lack of attention toward Latin America.

"For years and years, the hemisphere has been a low priority for the U.S., and the Chinese are taking advantage of it," the aide said, speaking on condition of anonymity. "They're taking advantage of the fact that we don't care as much as we should about Latin America."

To be sure, China, the world's second-largest consumer of oil, has emerged as a leading competitor to the United States in its search for oil, gas and minerals throughout the world - notably Central Asia, the Middle East and Africa.

China has accounted for 40 percent of global growth in oil demand in the last four years, according to the Energy Department, and its consumption in 20 years is projected to rise to 12.8 million barrels a day from 5.56 million barrels now. Most of that oil will need to be imported. The United States now uses 20.4 million barrels a day, nearly 12 million of it imported.

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