(Source: Datamonitor)Having all but spent the original agreed-upon $8 billion loan, Venezuelan president Hugo Chavez has asked China to advance a further $12 billion for future oil contracts. While Venezuela is indeed short of cash and struggling to maintain its 'development fund', the move can be interpreted as Mr Chavez's political agenda subverting positive economic development.

With nearly 8% of the world's proved oil reserves, Venezuela potentially represents a major business opportunity for most international oil companies (IOCs). Opening the market for international competition and private initiative could provide Venezuela with the opportunity to make significant progress in social and economic developments, while also gaining valuable technological know-how.

Instead, the situation in the country exemplifies one of the major current trends in the oil and gas industry: namely, resource nationalism. Not only is this counter-productive to the development of hydrocarbon assets, it also creates roadblocks for IOCs in their ability to maintain production rates and to access long-term supply sources.

By nationalizing the industry in Venezuela, Mr Chavez has merely subsidized his political agenda and political stranglehold. However, the latest oil-for-money negotiation with China suggests that the president lacks the financial resources to sponsor his own policies. Market liberalization would both bring more stability to international markets and unlock enormous potential for his own country. IOCs would flood into the region in search of high production yields and portfolio diversification..

Nevertheless, Mr Chavez has shown no signs of deviating from his strategy of resource nationalism. As such, co-operating with and embracing the presence of state-of-the-art international companies - that is, those which are both financially strong and technically capable - is certainly the best scenario going forward. This is not only the case for Venezuela, but also for other oil-rich nations which have headed down this perilous path.