On Wednesday, March 2, Leonard Stark, a judge for the District of Delaware, approved the start of the procedure for the sale of shares of the Venezuelan state-owned CITGO Petroleum Corp., which includes “the selection of a winning offer,” reported The Wall Street Journal.
Stark made this ruling despite the fact that the company is covered by a resolution from the Office of Foreign Assets Control (OFAC) of the US Treasury Department that prevents its liquidation without prior authorization from OFAC. The OFAC has been in de facto control of CITGO since 2019, when Washington ignored the authorities designated by the legitimate government of Venezuela and delegated administrative management to agents of former deputy Juan Guaidó.
According to The Wall Street Journal, the judge defended his decision on the grounds that the restrictions imposed by the OFAC do not prevent taking “preliminary” measures to continue with the process of selling shares of PDV Holding, a conglomerate owned by the Venezuelan State to which CITGO is affiliated. The judge also set a deadline to present a joint report on the situation.
The ruling, cited by The Wall Street Journal, reads: “It is hereby ORDERED that the objections of the parties to the sale process to the order of sale procedures proposed by the special judicial expert be REJECTED IN PART, to the extent explained in the opinion. IT IS FURTHER ORDERED that the parties to the sale process and the special judicial assistant meet and consult and, no later than March 9, 2022, present a joint report on the situation.”
The news report specifies that this sale “would serve to pay compensation of $1.2 billion to the Canadian company Crystallex,” due to the expropriation of the Las Cristinas gold mine decreed by former President Hugo Chávez. The Canadian company was also accused of non-compliance with labor and environmental regulations in Venezuela.
In response to the expropriation, the now non-existant mining company—today its interests are represented by Tenor Capital Management, a New York hedge fund—had sued Venezuela in international judicial forums until in 2016 the International Tribunal for Settlement of Investment Disputes (ICSID) ruled in favor of the plaintiffs and ordered the Venezuelan State to pay compensation for $1.2 billion plus interest.
The Venezuelan José Ignacio Hernández, former pseudo-prosecutor for Guaidó, played a central role in the evolution of the case in the US courts. He has been in the US since 2017. Starting from in 2019 he designed the strategy that made the demands of Crystallex and other creditors such as ConocoPhillips viable, as has been denounced by the Venezuelan government and later independently corroborated by the Argus agency.
On January 15, 2021, Judge Stark reauthorized the sale of CITGO shares to “compensate” Crystallex, but the decision was made subject to obtaining an OFAC clearance. Even in September 2021, Reuters reported that the US Treasury Department had denied the request to collect part of the debt through the sale of the Venezuelan oil company.
Although OFAC extended the protection license for the Venezuelan subsidiary until January 20, 2023, it is not known if it will lift the measure before that date or wait for its expiration so as not to renew it again. In any case, the auction of one of Venezuela’s most prized assets abroad is all set to take place.
Featured image: CITGO’s Lemont refinery in Illinois. File photo
Translation: Orinoco Tribune