Senators have pressed the Trump Administration to review the chances of Russia’s Rosneft acquiring Venezuela’s PDVSA and its U.S. business, Citgo. Marco Rubio and Bob Menendez believe a change in the ownership of Citgo’s assets would constitute a security risk, Reuters reported.
In a letter to Treasury Secretary Steven Mnuchin, the Republican and Democratic senators wrote that “Given Venezuela’s increasingly dire economic and humanitarian situation, we are seriously concerned with a possible acquisition by Rosneft of PDVSA and Citgo.”
Mnuchin is the chair of the Committee on Foreign Investment in the United States. The CFIUS is responsible for studying the national security implications of potential foreign acquisitions in the country.
The possibility of Russia’s biggest oil company taking over Citgo first surfaced early this year, as PDVSA’s troubles with falling production and lower oil revenues deepened, bringing it closer to a default on pending debts.
Rosneft could take control of 49.9 percent of Citgo, media warned back in March. PDVSA used the stake as collateral for a $1.5-billion loan provided by Rosneft last year, and the Russian company immediately filed a lien with the Delaware Department of State asserting its right to ownership in case PDVSA defaults on debt payments.
Later in the year, however, anonymous sources quoted by Reuters said that Rosneft and PDVSA were negotiating the swap of the 49-percent stake in Citgo, prompted by the possibility that Washington may impose sanctions on Venezuela, including the suspension of crude oil imports from the country, which would threaten Citgo’s long-term sustainability. Related: Have Oil Markets Reached A Turning Point?
The report remained unconfirmed by official sources after the new sanctions entered into effect. These, however, did not include a suspension of Venezuelan oil imports into the U.S.
The possibility of Rosneft taking over the whole of PDVSA seems a bit far-fetched. Russia is not the Venezuelan company’s only creditor. There is China, too. If the possibility of a foreign acquisition of the state company ever emerges, A China oil giant would be just as likely a buyer as Rosneft. This possibility is, however, very remote: Venezuela depends on PDVSA’s income for its survival.
By Irina Slav for Oilprice.com
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