August 1, 2019 / 2:28 AM / 20 days ago

U.S. sanctions on PDVSA block Crystallex from seizing Citgo shares: Guaido advisers

CARACAS (Reuters) - U.S. sanctions on Venezuelan state oil company PDVSA prevent Canadian gold mining company Crystallex from seizing shares in PDVSA’s U.S. subsidiary, Citgo, two advisers to Venezuelan opposition leader Juan Guaido said on Wednesday.

FILE PHOTO: The logo of PDVSA's U.S. unit Citgo Petroleum is seen at a gas station in Stowell, Texas, U.S., June 12, 2018. REUTERS/Jonathan Bachman/File Photo

On Monday, a U.S. court ruled that Crystallex International Corp could attach Citgo shares to collect on a $1.4 billion arbitration award as compensation for Venezuela’s expropriation of its mining assets in the country.

But Alejandro Grisanti, a Guaido financial adviser, said the sanctions the United States slapped on PDVSA in January as part of its bid to choke off government revenue and pressure socialist President Nicolas Maduro to step down mean Crystallex would need a waiver to attempt to seize Citgo.

Guaido in January invoked Venezuela’s constitution to assume an interim presidency, arguing Maduro is usurping the presidency based on a fraudulent 2018 election. He has been recognized as Venezuela’s rightful leader by dozens of countries, including the United States.

Since then, he has prioritized protecting Venezuela’s assets which are under threat from creditors and other parties seeking compensation from Venezuela’s highly indebted government.

In Monday’s ruling, U.S. Court of Appeals for the Third Circuit Judge Thomas Ambro wrote that any effort to attach PDVSA’s shares in Citgo’s parent company “would likely need to be authorized by the Treasury Department.”

The ruling “clearly establishes that Crystallex will need a license to be able to execute the asset,” Grisanti, also a member of a parallel ad-hoc board of directors Guaido appointed to PDVSA, said in a telephone interview.

“No creditor can judicially execute on PDVSA properties, including Citgo,” Jose Ignacio Hernandez, Guaido’s overseas legal representative, wrote on Twitter.

Supporters of Maduro, who calls Guaido a U.S. puppet seeking to oust him in a coup, attacked the U.S. court ruling.

“It is a huge international operation to steal resources from Venezuela,” the country’s Executive Vice President Delcy Rodriguez said in a state television broadcast on Wednesday about the court decision.

She argued that ever since the United States decided to no longer recognize Maduro as Venezuela’s president, the government “cannot take action or have representation in the United States.”

Crystallex declined to comment. Monday’s court ruling cited a Crystallex statement saying it “will seek clarification” on the license. The Treasury Department did not respond to a request for comment.

FURTHER THREATS

Crystallex is not the only threat to Venezuela’s ownership of Citgo. PDVSA pledged half of Citgo’s shares as collateral for its 2020 bond VE151299784=, and failure to make a $913 million payment due in October could allow bondholders to attempt to seize Citgo.

The other half of Citgo’s shares was pledged as collateral for a $1.5 billion loan granted by Russia’s Rosneft.

Grisanti said his representatives in the United States had requested the Trump administration issue an executive order protecting Citgo from seizure. No such order has been granted.

“We want the American government to understand that the worst that can happen for the end of the usurpation is to not protect Venezuela’s assets,” he said.

Later on Wednesday, Venezuelan Chief Prosecutor Tarek William Saab said his office was opening a criminal investigation into Hernandez.

Court records show that Hernandez in 2017 provided Crystallex’s lawyers with expert testimony on the relationship between PDVSA and Venezuela’s government. In a statement, Saab’s office said this amounted to “a conflict of interest that violates all judicial ethics” and “treason toward his fellow citizens.”

Guaido’s office responded saying Hernandez had recused himself from the case in March. When asked for comment by Reuters, Hernandez said Saab had “no authority.”

“He was appointed by the fraudulent constituent assembly,” Hernandez said, referring to a pro-government legislature created in 2017 that the opposition considers illegitimate. “Therefore, he cannot open a criminal investigation.”

Additional reporting by Deisy Buitrago and Shaylim Valderrama in Caracas; editing by Cynthia Osterman and Richard Pullin

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