The significant rise in Venezuelan bond prices was not solely due to investors anticipating a positive political outcome. It was part of a larger market trend where investors sought high returns across the entire emerging market distressed asset class, including countries like Lebanon and Sri Lanka.

Iraq's massive 80% debt write-off was an anomaly driven by the Bush administration's goal of building a stable democratic ally. The U.S. directly ran the country and had strong political motives for deep debt relief. This unique context is absent in Venezuela's case, making the Iraq precedent a poor guide.

China's independent refiners, known as "Shandong teapots," benefit significantly from sanctioned oil. They purchase discounted crude from countries like Venezuela, boosting their margins and supporting local economies. This trade is often conducted in renminbi, furthering China's goal of de-dollarization in energy markets.

Contrary to assumptions, oil majors are cautious about re-entering Venezuela. They worry about a lack of legal certainty and the risk that any deals could be undone and heavily scrutinized by a future U.S. administration, making the investment too risky.

While a $10 billion loss on Venezuelan loans is substantial, it's a small fraction of the over $2 trillion China has lent via its Belt and Road Initiative. For Beijing, the erosion of a key strategic foothold in Latin America is a far greater concern than the financial write-down.

The instability in Venezuela highlights the increasing geopolitical friction between the U.S. and China over commodities. This reinforces the strategy for central banks in emerging markets to buy gold as a way to diversify reserves, hedge against sanctions risk, and move away from the U.S. dollar.

While Venezuela was a key oil supplier and geopolitical asset, it was also seen as a failed investment ("money gone to waste"). Iran, by contrast, is a core strategic partner in China's "axis of ill will" against U.S. influence. A regime collapse in Iran would be a far more significant blow to China's global strategy.

While Chinese firms are anxious about their Venezuelan assets, their history in Iraq provides a roadmap. After the 2003 US-led invasion, Chinese companies were initially worried but eventually became the largest investors in Iraq's oil industry. This suggests a long-term strategy of patience and high risk tolerance to outlast political instability.

China loaned Venezuela over $60 billion but halted funding due to extreme corruption. Instead of making new strategic investments, China now focuses on asset recovery, accepting oil shipments simply to pay down the massive outstanding debt. This highlights the limits of 'debt trap diplomacy' in utterly dysfunctional states.