By Misión Verdad — Jan 18, 2023
Once again, the risk of the ultimate heist of the CITGO Petroleum Corporation, a subsidiary of Petróleos de Venezuela SA (PDVSA) on US soil, has increased. The United States Treasury Department recently extended the license that prevents the holders of the PDVSA 2020 bond from acting against the US subsidiary of the Venezuelan state oil company until April 20, 2023.
In exercise of the arbitrary “freezing” measures that the US government maintains against CITGO as the main Venezuelan asset abroad, the US Treasury Department via the Office of Foreign Assets Control (OFAC) published license number 5J, which replaces 5I, that had been issued in January 2022 and which extended the “protection” of CITGO until January 20, 2023. This implies that the US government has now given only three months to expose CITGO’s assets in order to renew the “protection” or not, for the benefit of companies that have sued Venezuela and bond holders of the PDVSA 2020 bond.
The Treasury Department has explained that while this license is in effect, “transactions related to the sale or transfer of CITGO shares in connection with the PDVSA 2020 8.5% bond are prohibited, unless specifically authorized by the OFAC.” The US Treasury specified that, to the extent that an agreement can be reached on the proposals to restructure or refinance the payments owed to the bondholders, the OFAC “would have a favorable policy licensing approach for said agreement.”
It is important to note that Venezuela has not been able to restructure and/or renegotiate its debt with creditors (including the holders of the PDVSA 2020 bond) due to the impediments imposed by the US financial blockade, disabling any possible deal on this matter with PDVSA and Venezuelan authorities.
The first scenario, which has the potential to run amok from April 20, is the cessation of the “protection” of the US government over CITGO. This would subsequently generate a seizure of the subsidiary’s assets by creditor companies, holders of the PDVSA 2020 bond, or companies who have sued the Bolivarian Republic, who—by winning in US courts—claim part of the assets of the US-based company as a form of payment.
However, the takeover of CITGO assets as collateral for non-payment of the PDVSA 2020 bonds is temporarily suspended, according to a decision made in October 2022 by the Second Circuit of New York. According to this court, there were “indications of unconstitutionality” regarding CITGO’s collateral as a guarantee in case of non-payment for the PDVSA 2020 bond. The decision on the legality of the transaction (the takeover of CITGO) is suspended while they request an opinion from the New York Court of Appeals (the highest court in that state), on whether the applicable law should be that of Venezuela or that of the state of New York.
As a second scenario, there could be an apparent détente, which translates into the opportunity to gain a few months and achieve a negotiation between Venezuela and its creditors. This scenario would suggest that the US government refers (via a new license) to a “Venezuelan party” as an authorized part for said negotiation, which could well be the Bolivarian Government, or (as is more likely to occur) the so-called “parliamentary government” or “Delegate Commission” created as a replacement for the former “interim government” of Juan Guaidó, eliminated in January by the Venezuelan opposition sectors that previously supported him.
This issue of “Venezuelan representation” abroad, in accordance with the illegal measures that have frozen Venezuelan assets, has had a turn on the part of the United States. In January 2023, the OFAC modified license number 31B to ratify the recognition of the “National Assembly elected in 2015” as the “legitimate parliament of Venezuela,” as well as its “Delegate Commission,” a body supposedly empowered to “protect” the Venezuelan assets illegally seized abroad.
Additionally, any negotiation that may take place by the “Venezuelan party” would be decisive. In the case of the so-called “Delegate Commission,” this would mean negotiations with creditors through liquid resources still retained abroad. This involves unfreezing those resources and handing them over to creditors, in a clear dispossession of national assets and a violation of Venezuelan sovereignty.
On the other hand, if it is the Bolivarian Government that manages to participate in this negotiation, it would have to have a license issued by the OFAC, and new oil licenses would have to be issued for PDVSA to be able to renegotiate and finance its commitments with creditors. Either of the two possibilities exposes the long and strong arm of abusive coercive measures against Venezuela, even if they appear to be a détente or space for “relief” from the blockade.
As a third scenario, it is possible that Washington is using the time factor and the situation of CITGO to intervene in the negotiations between the Venezuelan government and the opposition Unitary Platform, via the Mexico Talks.
A fourth and likely scenario is that, without the possibility of forcing the negotiation between Venezuelans, or without having an agreement with a “Venezuelan party” in a renegotiation or restructuring of the debt with the creditors of the PDVSA 2020 bond, the US government once again extends its “protection” measure on CITGO, immobilizing any deal that implies giving up or taking shares of CITGO for a certain period of time.
The last potential scenario, which has essentially been maintained since 2019, entails maintaining the de facto robbery that the gringos have applied to the company and the use of its predicament as an instrument of pressure on the legitimate government of Venezuela.
Translation: Orinoco Tribune
Misión Verdad is a Venezuelan investigative journalism website with a socialist perspective in defense of the Bolivarian Revolution
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