Extravagant Claims dogged by economic reality.

Hugo Chavez's recently expressed desire to sell 1 million barrels of oil a day to China may be best described as a pipe dream (no pun intended) as he and his government run into capacity building problems due to a confused national strategy within the oil sector. In a country where actual production has slipped from 3.3 million barrels a day to 2.3 over the past decade, this ambition seems to be wildly hopeful and suggests a disconnect between Venezuela's leadership and the realities on the ground.

A recent article in the Wall Street Journal has outlined a number of difficulties Venezuela will face in trying to reach Chavez's bold ambitions. First the country has failed to secure investments which would allow it to increase production in the future, and has been suffering from maintenance issues and industrial accidents which threaten to further decrease production levels as soon as next month.

Just in the last few weeks, PdVSA, as the state oil monopoly is known, has had to tackle fires and technical problems at a number of plants, including its largest refinery Amuay, which produces around 640,000 barrels a day.

Second, shipping oil to China presents a whole new set of issues for Venezuela. Venezuelan oil is notoriously expensive to refine, as it is extra heavy and very sour. Pair this with the added transport cost of shipping to a trading partner as far away as East Asia, add in the rumors that China has struck a discounted pricing structure deal with Chavez, and it is hard to imagine how any increase in shipments could be justified from an economic perspective, even if price of a global barrel stays high.

"...experts question the practicality of making expensive long-range oil shipments to China, which sources more than 90% of its oil from suppliers closer to home, mainly the Middle East, Africa and Russia. Likewise, Venezuela's natural and traditional market, the U.S., is just on the other side the Caribbean."

The relationship has been described as problematic, but indeed it may be more than that. Chavez's desperation to cultivate relationships with powers that he sees as being possible counters to American Hegemony mey be blurring his vision.

"U.S. Embassy cables from February 2010, released by Wikileaks, cited an unnamed PdVSA official saying China was paying as little as $5 per barrel of oil and then in turn selling it at a "sizable" profit."

If this is even partially true it uncovers some fairly foolish bahavior on Chavez's part and serves to discount much of his rhetoric about the relationship between America and the developing countries of the world. His imagined global position may indeed be self fulfilling.