HomePaís PetróleoThe Citgo theft harms Venezuela, but also the United States

The Citgo theft harms Venezuela, but also the United States

The already deteriorated relations between the United States and the Bolivarian Republic of Venezuela will fall several more steps if, as everything indicates, the sale of the PDVSA subsidiary, Citgo, is completed, the balance of which will be truly detrimental to the Homeland of Bolívar, but more still bloody for the voracious and insatiable nation of the north.

In short: three refineries with a refining capacity of 807.000 barrels per day, 38 terminals, 6 oil pipelines and 4.200 service stations, all valued between 11.000 and 13.000 million dollars, will be taken from the people of Venezuela.

But the United States will add to its record another resounding slap to the confidence of international investors in that country, for having broken and violated the always respected corporate veil, which protects any company from being expropriated for non-payment of a debt contracted by its owner, that is, another person, in this case, the government of Venezuela.

And in addition to the blow to the confidence of international investors, if the sale is carried out, every relationship and agreement with Venezuela will be marked by the history of having stolen Citgo, a criminal act that will always be latent, above and below the table. , raising the costs of any bilateral negotiations, without prejudice to the legal actions that Venezuela will take before world legal organizations to recover its assets.

An analysis by PDVSA of the political framework that violates the legal order of the US itself and the World Trade Organization, if the Citgo Petroleum Corporation auction were to take place, reports that since 2018 the US government has been carrying out maneuvers contrary to international trade with the clear intention to wrest control of the Citgo company from the Venezuelan State.

"These actions are evident when, a few days after the proclamation of Juan Guaidó as interim president of Venezuela, and his recognition by the North American authorities, the self-proclaimed man and his team carefully planned all the actions and plots aimed at achieving the expropriation of the Citgo operations.

The document points out that these measures are a clear violation of the regulations and clauses established in the World Trade Organization, this being the only international organization that deals with the global standards that govern trade between countries and whose main function is to guarantee that commercial flows circulate with the maximum fluidity, predictability and freedom possible.

He explains that the political party Voluntad Popular, in connivance with representatives of the US government, instructed their supporters in the National Assembly to appoint a new board of directors for Citgo and PDV Holding, going beyond the entire existing legal framework. This board was headed by Luisa Palacios and Carlos Jordá, both linked to the US financial and oil sector.

Immediately after this appointment, in March 2019, Carlos Vecchio, Guaidó's emissary in the United States, paid a visit to the Citgo company to establish that the interim government had effective control of the company.

In August 2018, the legal offensive of the Canadian company Crystallex began (of which the lawyer José Ignacio Hernández, Guaidó's future “attorney,” was part of its legal team), to gain a position of strength in the Delaware Court. by Judge Leonard Stark.

The judge, arguing that Pdvsa's share control over Citgo turned it into an alter ego of the Bolivarian Republic of Venezuela, proceeded to favor Crystallex's claim, despite the fact that in January 2018 a US Court rejected the lawsuit because Crystallex's action is with the Bolivarian Republic of Venezuela and not against Citgo.

The dispute between Crystallex and the Venezuelan State dates back to 2008, when President Hugo Chávez Frías carried out the nationalization that triggered an international lawsuit by the company, considering that it had been stripped of the rights to exploit the gold mine. Las Cristinas, located in the state of Bolívar.

In 2014, the International Center for Settlement of Investment Disputes ruled that Venezuela had to pay Crystallex the sum of 1.400 billion dollars after the arbitration process, an amount that included the interest generated.

“In 2017, Crystallex filed a lawsuit against Pdvsa to pay for the 2008 expropriation. In October 2018, the Bolivarian Republic of Venezuela took up the case, without clarifying the change in decision and without including Pdvsa, reaching a first agreement with Crystallex. for a payment of 425 million dollars.”

The Wall Street Journal reported that Crystallex CEO Robert Fung said Venezuela paid $500 million in cash and liquid instruments.

Additionally, “Venezuela has to provide collateral (guarantee) before January 10, 2019, to ensure payment of the balance it owes,” said Fung. Likewise, it was mentioned that Venezuela agreed to cancel the rest of the amount owed in installments payable until the beginning of 2021. But unilateral coercive measures prevented any type of payment to the Bolivarian Republic of Venezuela. Thus, according to Crystallex, the Bolivarian government did not comply with that debt and took the case to a civil court in Delaware (PDV Holding Inc., the parent company of Citgo, is incorporated in this state). The ruling determined that PDVSA functioned as an “alter ego of the Venezuelan government” and, by extension, Crystallex could annex the assets of its subsidiary Citgo to satisfy the debt.

But the geopolitical scenario changed. The consolidation and growing recognition of the Bolivarian government by countries in international bodies is growing. On August 28, 2020, the United States Department of Justice files a supplemental document in support of the United States' declaration of interest in the Crystallex seizure proceeding.

In this document, the United States admits that proceeding towards a forced sale of PDV Holding shares at that time “could generate significant damage to the foreign policy of the United States.”

Even so, in January 2021, US Judge Leonard Stark, assigned to a court in the state of Delaware, in the United States, authorized Crystallex to continue with the sale of shares of the aforementioned PDVSA subsidiary and enforce in its favor a award of 1.400 billion dollars.

In April 2023, Citgo's ad-hoc board prepared to appeal the decision to seize shares for debts by five companies; one of them is the Canadian mining company Crystallex for 970 million dollars since 2007. The other four companies are OI Glass, Huntington Ingalls Industries, ACL1 Investments and Rusoro Mining, which received the court's approval after demonstrating that the state oil company PDVSA is the “ alter ego".

Recently, the media aligned with the US government's communication policy, the Voice of America, reports that a US court on June 14 approved claims by 17 creditors linked to Venezuela, including Conoco Phillips, Rusoro Mining and Koch Industries, to obtain profits from an upcoming auction of shares of Citgo Petroleum's parent company.

The list, which narrowed the scope of the claims to $20.800 billion from the $24.000 billion requested by creditors, comes after a judicial official excluded arbitration awards and court rulings that had not timely met court requirements. .

“Creditors have flocked to a US court in Delaware to file claims that nearly double Citgo's value to between $11.000 billion and $13.000 billion,” he says.

The first bids for the shares are due on Monday, June 17, and a second round of bids will take place later this year. A final decision on the winners is still months away and awards require approval from the US Treasury Department, which has protected Citgo from creditors since 2019.

The auction, which could lead to one of the largest judicial sales in US history, was launched in October 2023 by US Judge Leonard Stark after receiving the green light from the Treasury.

After the US Supreme Court rejected Venezuela's appeal in January, Stark allowed more creditors to join the auction. Most of them, including Contrarian Capital Management and the Pharo Gaia and Gramercy funds, were authorized by the court on Friday to participate.

The Voice of America says a sale to compensate creditors faces fierce opposition from Venezuelan President Nicolás Maduro, who has described the legal action as a theft, and from the Venezuelan opposition, which fought against the ruling that Citgo is responsible of Venezuela's debts to the Supreme Court of the United States.

“The possible loss of Citgo could also be seen as a setback for Washington, which has tried to improve relations with Venezuela to promote fair elections in the country,” the outlet says.

The court hired investment bank Evercore Group to value the shares and execute the trading process, which received prior authorization from the US Treasury. Evercore has not publicly disclosed details of the valuation and the bidding process could remain largely confidential.

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