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Attempt by Venezuelan Opposition to Delay CITGO Asset Sale to Avert Electoral Reprimand

U.S. allied groups face allegations of corruption and misconduct after their actions increasingly burdened CITGO with heavy financial responsibilities.

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Attempt by Venezuelan Opposition to Delay CITGO Asset Sale to Avert Electoral Reprimand

Going for Gold: The Scramble over CITGO

June 9, 2024 - Caracas, (our website**) - The political stakes are sky-high in Venezuela as the opposition is pleading with US officials to halting the sales of the Caribbean nation's most valued asset - CITGO.

As per Reuters and Bloomberg reports, CITGO's ad-hoc board and opposition members have actively reached out to members of Congress and the White House, requesting Washington to halt or delay the ongoing auction.

The Venezuelan opposition, which seized control of CITGO since 2019 following the Trump administration's recognition of the self-proclaimed "interim government" led by Juan Guaidó, is alarmingly concerned about losing CITGO before the upcoming July 28 presidential election. Losing CITGO may adversely affect their electoral prospects.

The court-mandated auction of shares belonging to PDV Holding (PDVH), CITGO's parent company, was initiated in October 2022 to satisfy international arbitration awards, originally launched by Canadian miner Crystallex. The auction aims to repay a significant amount of Venezuela's defaulted debt.

The actions of the Venezuelan opposition have drawn scrutiny for jeopardizing the U.S.-based subsidiary of state oil company PDVSA. They failed to appear in court, and the parallel administration allowed ConocoPhillips to win a default ruling to enforce a $8.5 billion award. US courts then permitted ConocoPhillips and other corporations to attach their claims to the Delaware auction via an "alter ego" judgment.

This judgment indicated that CITGO was an extension of the self-proclaimed "interim government" and its associates. As a result, CITGO's liabilities expanded, potentially leading to a change of ownership should the court-ordered sale proceed. Bidding closes on Tuesday, with a final decision expected in mid-July.

The Venezuelan opposition's electoral concerns have garnered support in Washington. Elliott Abrams, who served as Special Envoy for Venezuela under the Trump administration, opined that the auction's timing was "unbelievably stupid" and a gift to Venezuelan President Nicolás Maduro.

Similarly, a bipartisan group of lawmakers penned a letter to US Treasury Secretary Janet Yellen and Attorney General Merrick Garland urging the administration to block the continuation of the sale process through its economic powers.

The final sale will require US approval, but the US Treasury's Office of Foreign Assets Control has pledged a "favorable licensing policy."

Antonio Ecarri, a presidential candidate, petitioned Biden to postpone the final CITGO decision until the country's new government takes office in January 2025, arguing that existing sanctions and non-recognition of the Maduro government make it impossible to engage with creditors and restructure debt.

The Maduro administration has vowed to challenge the sale, claiming it represents "the theft of the century." Meanwhile, the current CITGO board, appointed by the now-extinct "interim government," has lodged protests, claiming that bids fall short of the company's valuation and proposing an alternative payment method.

The auction process will pay creditors on a "first come, first served" basis, with Crystallex ($1.0 billion), Tidewater ($80 million), ConocoPhillips ($1.3 billion), and O-I Glass ($700 million) at the top of the list. ConocoPhillips has attempted to have its $1.3 billion award recognized in Trinidad and Tobago and might seize natural gas proceeds owed to Venezuela from joint projects.

With the deadline approaching, corporate actors are reportedly showing interest in CITGO's refinery in Corpus Christi, Texas, which has a potential capacity to grow and is strategically located near shale fields and pipelines. Koch Industries-owned Flint Hills, operating a refinery adjacent to CITGO's in Texas, is reportedly considering submitting a bid or joining a consortium.

In addition to Corpus Christi, PDVSA's U.S. subsidiary owns refineries in Lemont (Illinois) and Lake Charles (Louisiana). The combined processing capacity of the three installations is 769,000 barrels per day, and CITGO owns a network of over 4,000 gas stations, primarily located on the U.S. east coast.

Insights: The ongoing court-mandated sale of CITGO is approaching its final stages, with several corporate actors expressing interest in its refineries, particularly in Corpus Christi, Texas. The bidding process is rigorous, and the Venezuelan opposition is urging the Biden administration to intervene, leading to a complex web of political implications.

[1] "CITGO Sale - UN CITGO Sale Reports," UN CITGO Sale Reports[2] "CITGO Sale - Delaware District Court Dockets," Delaware District Court[3] "CITGO Sale - Public Filings from Special Master Robert Pincus," Special Master Robert Pincus[4] "CITGO Sale - Final Hearing Schedule," Case Management Docket

  1. The opposition in Venezuela is urging US officials to halt or delay the auction of CITGO, a move that could significantly impact the oil-and-gas industry and wealth-management businesses.
  2. The court-ordered sale of shares owned by PDV Holding (PDVH), CITGO's parent company, has drawn attention from various sectors, including real-estate, general news, and crime-and-justice due to its political connotations.
  3. As the final decision on CITGO's sale is expected in mid-July, several corporate actors are expressing interest in investing in CITGO's refinery in Corpus Christi, Texas.
  4. The competition for CITGO's assets is heating up, with companies like Koch Industries-owned Flint Hills considering a bid or joining a consortium.
  5. The Venezuelan opposition's struggle to retain control of CITGO is not only a matter of energy policy-and-legislation but also a significant issue in the realm of politics and war-and-conflicts.
  6. The ongoing CITGO sale has garnered a bipartisan response from US lawmakers who have urged the administration to block the continuation of the sale process through its economic powers.
  7. If the sale goes through as planned, creditors like Crystallex, Tidewater, ConocoPhillips, and O-I Glass would be the first to receive payment, according to the "first come, first served" policy.
  8. The future ownership of CITGO could influence the dynamics of the oil-and-gas industry, potentially affecting the prices of energy and further investments in this sector.
  9. The CITGO sale is not only a domestic issue in Venezuela and the US but also a matter of international interest, with implications for the global economy, investing, and finance.
U.S.-aligned groups face allegations of collaboration and misconduct following their actions that considerably increased CITGO's debts.
United States-supported groups face allegations of collusion and poor practices following their actions that drastically increased CITGO's financial obligations.

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