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The Treasury Department extended a moratorium on transactions on a bond issued by the U.S. arm of Venezuela’s PDVSA, Citgo, for another year in the latest move to shield the company from creditors trying to take it over.
According to Bloomberg, this is the longest extension of the ban so far.
AFP recalls that control of the U.S. business of PDVSA was handed over by the Trump administration to the Venezuelan opposition led by Juan Guaido in 2019 after a round of new sanctions against Caracas. It is as part of efforts to keep Citgo in Guaido’s hands that the ban on transactions was extended.
The complicated situation that Citgo is in right now is a result of PDVSA using the U.S. business as collateral for a lot of loans. One such loan made Russia Rosneft, for example, eligible for effectively taking over Citgo if the debt was not repaid—something U.S. authorities have vowed never to allow.
Yet there is also a Canadian company that has laid a claim to Citgo. Crystallex, a miner that saw its operations in Venezuela nationalized by Hugo Chavez, won a court battle against Venezuela a few years ago that ended with it being awarded compensation to the tune of $1.4 billion.
Since the government in Caracas was highly unlikely to respect the ruling of the arbitration court, Crystallex made an approach to take over Citgo and sell it—or rather its parent company that controls the capital—to get its money. It scored a point in that fight when a U.S. judge ruled that Citgo was not separate from the Venezuelan state, so Crystallex could claim it as a means of getting its awarded compensation.
But Crystallex is far from alone. Just last year, creditors were owed some $7 billion by Citgo’s ultimate parent, PDVSA, and the Venezuelan state, converged on the company to collect filing claims against the company. The biggest creditors in the crowd are ConocoPhillips which is owed $1.3 billion because of Chavez’s nationalization back in the 90s, and a group of investors who bought into a Citgo bond, now in default. The group’s claim is for $2 billion.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com