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Venezuela’s state-owned oil company PDVSA has settled an arbitration case brought against it by Canadian miner Crystallex and has paid the company US$1.4 billion to avoid having its most precious business, U.S. downstream operator Citgo, auctioned off so Crystallex can collect what the court awarded it for the nationalization of its Venezuelan operations.
Reuters cited court documents revealing that had already made one payment under the arbitration case, of US$425 million, most of it in “liquid securities” and the rest in Venezuelan and PDVSA bonds. The rest will be paid by early 2021.
A U.S. federal judge in August awarded Crystallex the right to approach Venezuela’s U.S. oil unit to seek its compensation of US$1.4 billion. 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.
And then there is another Canadian mining company, Rusoro, which is also seeking compensation, to the tune of US$1.3 billion, for the forced nationalization of its assets in the troubled South American country, home to the world’s largest oil reserves.
In the meantime, Caracas has defaulted on debts worth tens of billions of dollars, squeezed between falling oil production and revenues, and U.S. sanctions.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.