Within the sometimes crazy world of international finance, U.S. refiner Citgo was purchased by the Venezuelan national oil company PDVSA, in 1986. At the time, Venezuela had much better relations than they enjoy currently and far fewer Americans had qualms about the brand with the iconic sign outside Fenway Park being in the hands of a foreign company.
The on-going economic free-fall in Venezuela, caused by lower oil prices and economic mismanagement, has left Citgo as one of the most salable assets the government holds. They recently put it on the market at a price of about $10 billion. When the sale didn’t attract buyers, it opened the door for Russia state-backed oil company Rosneft to purchase a substantial amount of PDVSA’s debt that is secured by a majority interest in Citgo. Should PDVSA default on those bonds, a not unlikely outcome, Rosneft would be in a position to take possession of Citgo assets in the United States. Those assets include three refineries and nine pipelines.
Treasury Secretary Steve Mnuchin has said that that outcome would be treated as a national security event and reviewed, but ongoing investigations into President Trump’s ties to Russia could taint any outcome of that review. Another issues also complicate the outcome: U.S. companies have billions of dollars of legal claims on Venezuelan assets and could attempt to claim priority.
Rosneft itself has stated that the purchase of PDVSA’s debt was merely an investment and that the oil company has no plans to operate a United States network of refineries and pipelines.
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