A default by Venezuela on Loan from Russia could put Citgo in Russian hands

Fuel Fix:
U.S. Sen. Ted Cruz and six other members of Congress are asking President Donald Trump to avoid a situation that could put the Houston refining company Citgo in Russian hands.

In an attempt to unseat Venezuelan strongman Nicolas Maduro, the Trump administration placed harsh economic sanctions on South American nation and its state-run oil company Petroleos de Venezuela SA, or PDVSA — both of whom owe billions to the Russian oil company Rosneft.

Using Citgo as collateral, the Venezuela government received a $1.5 billion loan from Rosneft in 2016. On top of that, PDSVA is supposed to make a $915 million bond payment on Oct. 28 but if the Venezuelan company defaults, Cruz and the others fear that could trigger a chain of events that could end with Rosneft owning 49.9 percent of Citgo.

"The potential for Rosneft to have any control of a U.S. company poses a major threat and exposes critical infrastructure to national security threats," Cruz and the others warned in a joint letter.

In their letter, Cruz and the others are asking the Trump administration to clarify that the debt belongs to and must be paid by Maduro regime.

The Trump administration and dozens of other democracies have recognized Venezuelan opposition leader Juan Guaido as the president of the troubled South American nation. As part of that recognition, the Trump administration also gave Guaido legal control of Citgo, which changed its leadership team this summer.

Cruz and the others fear that PDVSA will not make the payment in order to spite Guaido.

"Since control of Citgo has been transferred to the government of Juan Guaido, we are concerned that Maduro has no incentive to make additional bond payments and may gain political benefit by defaulting on the bonds, claim Juan Guaido is responsible for the loss of Citgo," Cruz and the others wrote.

Citgo owns and operates refineries in Corpus Christi; Lake Charles, Louisiana and Lemont, Illinois that employ 5,300 people and provide gasoline and diesel to 4,900 gas stations across the United States.
Since the money from the loan was to finance government operations it is clearly Venezuela's debt, but a default could give Russia a chance to seize control of Citgo.  It is not clear how the US could stop Russia from exercising its lean of Citgo despite the transfer of ownership.  It might require a loan to the Guaido regime.  That would probably require Congressional approval.


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