Venezuela’s biggest asset abroad, Citgo, the American subsidiary of the public oil giant PDVSA, is at a crossroads entangled in colossal debts but also in the political imbroglio between Caracas and Washington.

The United States, which has sought to oust President Nicolas Maduro from power since his re-election in 2018 in a vote boycotted by the opposition, imposed sanctions on Venezuela aimed particularly at the oil sector, weakening Citgo whose value was estimated at nearly $5 billion in 2019 but would be worth much more.

Its debts, but also and above all those of its parent company PDVSA and Venezuela in the United States, are now higher than its value. American creditors are pressing and have taken legal action to sell the company and recover their funds.

The Houston-headquartered company markets some 800,000 barrels per day of fuels and products to more than 40 countries.

The list of creditors is growing and the disputes of the various procedures in the United States would exceed 20 billion dollars, according to the consulting firm EMFI Securities, based in London.

This figure includes Citgo’s “direct” debts but especially PDVSA bonds issued by the Maduro administration in 2020 with 50.1% of Citgo shares as collateral, and disputes over the expropriation of oil and mining assets in Venezuela by the state.

In 2019, with American sanctions and the freezing of assets abroad, Citgo escaped Venezuelan power and was placed under the control of the opposition recognized as “interim” power by Washington, which refused to endorse Maduro’s re-election. .

“It’s not that Citgo was in danger of being lost, He already was”, underlines the president of Citgo, Horacio Medina, who still hopes.

According to him, Citgo, which was already experiencing turbulence before the crisis, has the capacity to renegotiate some $11 billion of the amounts claimed. “Citgo was worth (in 2019) $4.5 billion and its debt was $4.8 billion,” Medina told AFP.

Since the opposition control, the US Treasury, on the orders of the presidency, had taken “protective” measures which blocked for months the execution of court decisions against the company.

Today, with a valuation of some $10 billion according to Medina, Citgo is in a better position. Driven by refining boosted by rising fuel prices with the Ukrainian crisis, it announced profits of $2.8 billion in 2022 and $937 million in the first quarter of 2023. The company could finish paying its own debts in September, according to Mr. Medina.

But the future remains uncertain: Federal Judge Leonard Stark approved measures last year to sell the shares of PDV Holding – Citgo’s parent company – as compensation to the Canadian company Crystallex for the expropriation of a mine in Venezuela in 2011.

The American company ConocoPhillips is also awaiting compensation for expropriations that occurred in 2007.

Companies, even public ones, are normally considered separate entities from the state, but Judge Stark validated one of the creditors’ arguments: Citgo is an offshoot of the Venezuelan government, therefore an asset available to pay the liabilities of PDVSA and the Venezuela.

Maduro, who retains control of PDVSA (but the ad hoc board led by Medina manages Citgo) denounces “theft” and “looting”.

The threat of a sale looms: On May 1, Joe Biden’s administration announced that it would take “no further action” to protect Citgo or block its sale.

“I won’t say it’s impossible (to avoid the selloff), but it’s unlikely,” said Pilar Navarro, economist at EMFI Securities. “The situation is getting more and more complicated. The liquidation process is moving forward.”

Both the opposition and Venezuelan power are demanding that Citgo be included in the negotiations launched in 2021 between Mr. Maduro and the opposition, but the talks have been stalled for months.

Only hope: Washington has said it is ready to partially lift the sanctions against democratic advances in view of the 2024 presidential election.

An easing of sanctions would allow Venezuelan crude to be exported to the United States. “Part” of the income generated could be devoted to paying the Venezuelan debt to the USA.

A solution which would have the advantage of satisfying everyone, the creditors like Venezuela, underlines Mr. Medina.

However, he acknowledges that the sale will be inevitable if complaints based on Judge Stark’s ruling continue to pour in: “We cannot solve all the cases (…) It is not possible for Citgo to answer of PDVSA and the Venezuelan Republic.

29/06/2023 05:06:18 –         Caracas (AFP) –         © 2023 AFP