Nicolás Maduro • Venezuela • Citgo • PDVSA (8/40)

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Venezuela’s Guaido orders new boards for PDVSA, Citgo

Reuters
Citgo Petroleum Corporation headquarters is pictured in Houston
Citgo Petroleum Corporation headquarters is pictured in Houston, Texas, U.S., January 25, 2019. REUTERS/Laila Kearney

By Corina Pons and Marianna Parraga

CARACAS/MEXICO CITY (Reuters) – Venezuelan opposition leader and self-proclaimed president Juan Guaido said on Monday he has ordered congress to begin the process of naming new boards of directors to state oil company PDVSA and U.S. refining subsidiary Citgo.

Guaido’s team of advisers was rushing to take control of the country’s main foreign asset, U.S. refiner Citgo Petroleum, before a potential bond default that could leave half the company in creditors’ hands, sources close to the talks told Reuters on Monday.

Guaido, who proclaimed himself president last week and has not yet appointed a cabinet, faces the intricate legal challenge of nominating new leadership for PDVSA, the state-owned oil and natural gas company, and its subsidiaries, including Citgo, who would manage the companies during a transition.

It comes as the United States announced new sanctions on PDVSA that involve limiting PDVSA’s transactions with people in the United States, although U.S. refineries can still import Venezuelan oil, Treasury Secretary Steve Mnuchin said on Monday.

Guaido, who runs the opposition-controlled congress, claimed Venezuela’s presidency last week after President Nicolas Maduro was re-elected last year in a vote widely considered a sham. The United States and numerous nations in the hemisphere recognised Guaido as the president but Maduro still controls the military and PDVSA. [L1N1ZQ0E9]

Holders of Venezuela’s most watched PDVSA bonds, which mature in 2020, are due a $72 million interest payment in late April. Those bonds are collateralised with 50.1 percent of Citgo Holdings’ equity, meaning in the absence of a payment, creditors could seize control of the company.

Without sources of revenue and control of foreign assets, Guaido’s team faces long odds in succeeding, despite massive protests against Maduro’s regime due to an economic crisis that has caused millions to flee the country. Many people are starving while inflation has skyrocketed and left basic goods unaffordable.

The United States imposed sanctions on Venezuela in 2017 that have prevented Citgo from repatriating dividends to its parent company. It had about $500 million in cash at the end of September, according to a creditor who spoke to Reuters last week, and $900 million in available credit.

Citgo separately faces a July deadline to refinance its revolving credit, a task that could be delayed due to sanctions affecting the subsidiary’s ability to access to credit.

(Reporting by Corina Pons and Marianna Parraga; Writing by Cynthia Osterman; Editing by Lisa Shumaker and Bill Trott)

Trump Sanctions Venezuela Oil Company PDVSA, Pressuring Maduro

Saleha Mohsin and Jennifer Epstein
Bloomberg
Trump Sanctions Venezuela Oil Company PDVSA, Pressuring Maduro

(Bloomberg) — The Trump administration dealt its toughest blow yet to the authoritarian Venezuelan leader Nicolas Maduro, issuing new sanctions on the nation’s state-owned oil company PDVSA that effectively block his regime from exporting crude to the U.S.

The move ratchets up pressure on Maduro to resign and cede power to National Assembly leader Juan Guaido by cutting off the regime from the market where it gets the bulk of its cash. The U.S. and other countries recognized Guaido last week as Venezuela’s rightful president, and he said Monday he would take control of Venezuelan accounts abroad and appoint new boards to PDVSA and its Houston-based subsidiary Citgo Petroleum.

U.S. President Donald Trump assailed Maduro in a letter to Congress explaining an executive order he issued sanctioning PDVSA and Venezuela’s central bank. The action would bolster Guaido, he said, while accusing Maduro’s regime of “human rights violations and abuses in response to anti-Maduro protests, arbitrary arrest and detention of anti‑Maduro protesters, curtailment of press freedom, harassment of political opponents, and continued attempts to undermine” Guaido’s government-in-waiting.

“The U.S. is holding accountable those responsible for Venezuela’s tragic decline,” Treasury Secretary Steven Mnuchin said.

Maduro and Guaido, a 35-year-old engineer-turned-lawmaker, are now locked in a struggle for support in the streets, the military and the country’s mainstay oil industry. Guaido so far hasn’t been able to sway the armed forces to his side but he’s tapped deep public discontent with an economy beset by hyperinflation spiraling at an annual rate of about 225,000 percent and vast shortages of food and medicine.

National Security Adviser John Bolton told reporters at the White House that Trump’s action would block $7 billion in Venezuelan assets and reduce the country’s exports by $11 billion over the next year, though Maduro is sure to attempt to sell PDVSA’s crude elsewhere. Bolton urged Venezuela’s military to accept a peaceful transfer of power to Guaido.

Mnuchin said that Citgo would be able to continue to operate but won’t be allowed to remit money to the Maduro regime. Its proceeds must instead be held in blocked U.S. accounts.

The Treasury secretary added that in the “short term” he expects “modest” impact on U.S. refineries. He noted the sanctions wouldn’t affect oil already purchased that is being shipped, and said he didn’t expect U.S. gas prices to rise.

West Texas Intermediate crude futures were little changed at $52.16 a barrel after the announcement, after settling $1.70 lower on the day.

As of Monday, all PDVSA assets and property subject to U.S. jurisdiction are blocked, according to a Treasury statement, and U.S. citizens and companies are generally prohibited from doing business with the Venezuelan firm. The move is consistent with the Trump administration’s efforts to starve Maduro of oil money, while still blunting the potential impact on U.S. refiners and U.S. motorists, said Jim Lucier, managing director of Washington, D.C.-based Capital Alpha Partners.

The administration is using “a scalpel, rather than a meat ax,” he said in an email.

U.S. Senator Marco Rubio praised the sanctions in a statement released before they were announced.

“The Maduro crime family has used PDVSA to buy and keep the support of many military leaders,” Rubio said. “The oil belongs to the Venezuelan people, and therefore the money PDVSA earns from its export will now be returned to the people through their legitimate constitutional government.”

The Florida Republican represents a large Venezuela expatriate community and is a vocal opponent of the Maduro regime, which the U.S. declared illegitimate last week.

But Senator Bob Menendez of New Jersey, the senior Democrat on the Foreign Relations Committee, said the Trump administration should brief Congress on its moves against Maduro. He praised U.S. efforts to “support the restoration of democracy in Venezuela” but said “there are more questions than answers about the administration’s strategy.”

The sanctions would be the latest move in Trump’s campaign oust the leftist regime of Maduro, who succeeded the late President Hugo Chavez in 2013.

PDVSA has been moving away from dollar-denominated transactions in the past couple of years, since the Trump administration announced financial sanctions in August 2017. The company sells oil to clients in the U.S., Europe and Asia and requires payment in euros, and buys gasoline and diesel for payment in euros as well.

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