PDVSA's control of its US-based subsidiary hangs in the balance after a US federal appeals court rejected on Monday Venezuela's state-owned oil company's appeal to knock down an earlier court order that allowed Crystallex International Corp to take over Citgo shares in compensation for $1.4 billion in unpaid debt, according to Reuters.
The loss for PDVSA and Venezuela is profound, setting a dangerous precedent for more of Venezuela's debts to be repaid through the unwilling seizure of Citgo shares. The Citgo refinery processes 750,000 barrels of crude per day.
Venezuela has long argued that Citgo should be immune from the billions in debt that Venezuela has accrued on the grounds that they are two separate entities, but US courts disagree, ruling that PDVSA and PDVH did not show adequate separation from the Venezuelan government, which has accrued billions in debt with multiple parties.
"The District Court acted within its jurisdiction when it issued a writ of attachment on PDVSA's shares of PDVH to satisfy Crystallex's judgment against Venezuela, and the PDVH shares are not immune from attachment," Judge Leonard Stark wrote in the judgement, according to Reuters.
Citgo's position is precarious in that it is the most lucrative overseas asset of Venezuela, but its presence in the US means it is subject to US laws and US court rulings. Its position is made even more precarious because the US government does not officially recognize the presidency of Nicolas Maduro.
Citgo Petroleum Corp. is of the largest oil refineries in the United States. Its current operations are managed by two dueling boards of directors-one appointed by Maduro and one appointed by Guaido, and both are digging in over the power struggle for Venezuela's US-based refinery that rakes in $30 billion in revenue.
By Julianne Geiger for Oilprice.com
More Top Reads From Oilprice.com:
Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group. More