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Crystallex Threatens Venezuela’s Crown Jewel Citgo Again

Canadian miner Crystallex has accused Venezuela of breaching a US$1.4-billion settlement agreement as PDVSA continued to try and overturn a court order that allowed Crystallex to take control of the stock of Citgo’s parent company, Reuters reports. This is the latest blow to Citgo, PDVSA’s precious downstream business in the U.S. that the company—and Caracas through it—has tried to keep at all costs.

What’s more, Crystallex had already hired banks to organize a forced sale of Citgo stock in order to get its US$1.4 billion, a lawyer for the Canadian mining company said, but the process has been suspended because Venezuela wasted no time in disputing Crystallex’ accusation.

The crux of the matter is the ownership of Citgo. While it is a unit of PDVSA, PDVSA is a state-owned company, according to a court ruling from earlier this year. The ruling by Chief Judge Leonard P. Stark was unique: government assets such as Citgo’s parent, PDVSA, are as a rule protected from lawsuits targeting a state. Yet in Stark’s ruling, the judge said that Venezuela had blurred the lines between the government and the state oil firm, with a military official at the helm of PDVSA.

Crystallex is also not the only one eyeing Citgo as a means of getting what it claims it is due for the nationalization of its assets. ConocoPhillips also won a case against Venezuela and earlier this year stepped up its efforts to receive its dues by seizing PDVSA assets in the Caribbean. The strategy worked and PDVSA coughed up US$345 million as the first part of a US$2-billion settlement.

Another Canadian mining company, Rusoro, also recently reached an agreement to settle its US1.3 billion compensation claim against Caracas but, according to sources cited by Reuters, it won’t be able to get its money because of U.S. sanctions on Venezuela.

By Irina Slav for Oilprice.com

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  • RefCoor on December 12 2018 said:
    No one should be surprised by this at all. VZ is currently producing just over 1.1M bpd and they owe Rosneft and CNOC a combined 1,060K bpd, which leaves a whopping 50-100K bpd to buy everything else that a country needs. Hence, that is why Quevedo has shorted both companies a combined 500K bpd, so that VZ has some source of cash to buy needed items such as food,medicine, etc. Last in line, will be payments on debt and judgements, even if it is to keep Citgo out of creditors hands.

    Crystallex finally woke to the fact that they would never see their phased payments totaling $1.4B from VZ. The safest route to any cash from VZ is through the liquidation of a VZ asset in the US. Citgo will be sold for something to someone within 12-18 months, about as much time as VZ has left as a country. The darkness is deepening.

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