August 6, 2019 / 5:09 PM / a month ago

New U.S. sanctions on Venezuela protect Citgo from seizure -Guaido

CARACAS, Aug 6 (Reuters) - Venezuela’s opposition on Tuesday celebrated a sweeping U.S. sanctions order against the government of President Nicolas Maduro, saying the measure would protect Venezuela-owned U.S.-based refiner Citgo from seizure by creditors.

Washington on Monday announced a freeze on all Venezuelan government assets in the United States, escalating an economic and diplomatic pressure campaign aimed at removing the socialist president.

The move comes after opposition leader Juan Guaido asked the United States to issue an executive order protecting Citgo, a subsidiary of state oil company PDVSA which bondholders and other parties are eyeing for possible seizure as a way to receive compensation from Venezuela for unpaid debts.

“Today there is no possibility of losing Citgo,” Guaido, the leader of the opposition-controlled Congress, who in January invoked Venezuela’s constitution to assume an interim presidency, told reporters on Tuesday.

The United States and most Western nations have recognized Guaido as Venezuela’s legitimate leader, arguing Maduro’s 2018 re-election was illegitimate. Maduro calls Guaido a U.S.-backed puppet, and his foreign ministry said the new U.S. measure formalizes a “blockade.”

Creditors that could lay claim to Citgo include companies suing for compensation for nationalization of their assets as well as investors holding bonds issued by PDVSA. One PDVSA bond issue is backed by Citgo shares.

Citgo declined comment, while PDVSA did not immediately respond to a request for comment.

Houston-based Citgo operates refineries in Texas, Louisiana and Illinois that can process up to 749,000 barrels of crude oil per day. It had relied on its parent in Venezuela for heavy crude supply before U.S. sanctions were introduced in January, and now imports mostly from Mexico and Colombia, according to U.S. Energy Department figures.

The asset freeze follows repeated rounds of sanctions against Maduro that have hampered Venezuela’s already collapsing socialist economy but failed to dislodge him, or convince his military allies to turn against him.

Monday’s executive order maintained certain exemptions to the sanctions for companies that do business with PDVSA.

Licenses to the sanctions published on Tuesday reiterated that companies can continue to do business with Citgo for 18 months without fear of getting sanctioned, and that U.S. companies, including Chevron Corp, can continue operating in Venezuela through Oct. 25.

The Treasury Department also authorized the Nynas joint venture between PDVSA and Finnish biofuel producer and oil refiner Neste to continue business with PDVSA through October.

SUPPORTING A ‘BRUTAL DICTATORSHIP’

Maduro retains the backing of allies like Russia and China, whose state-oil companies Rosneft and CNPC have maintained joint ventures with PDVSA and continued buying Venezuelan crude, mostly to collect on loans.

Several other European and Asian companies, including Spain’s Repsol, France’s Total, and India’s Reliance have maintained business with PDVSA.

Still, the asset freeze threatened to block U.S. assets of foreign companies that provide “material assistance” to the Venezuelan government, raising questions about the effect on PDVSA’s remaining suppliers, joint venture partners and customers.

U.S. National Security Adviser John Bolton issued a warning to Chevron on Tuesday, when asked by reporters about the company’s presence in Venezuela during a summit in Lima, Peru.

“I would say to the board of directors and the shareholders of any American companies: Is it in your corporate culture to engage in commercial activity that supports a brutal dictatorship? Is that really how you want to be known?” Bolton said.

Chevron did not immediately respond to requests for comment.

A previous Treasury Department license exempted holders of PDVSA’s 2020 bond from any sanctions. Those bonds are backed by a 51 percent stake in Citgo, which is under the control of an ad-hoc board appointed by Guaido.

Failure to make a $913 million payment due in October could allow them to seize Citgo.

Jose Ignacio Hernandez, Guaido’s chief overseas legal representative, asked the United States to eliminate the license for 2020 bondholders but praised the executive order, saying it had reinforced measures protecting Venezuela’s assets in the United States.

“The protection of Citgo is now stronger,” he wrote on Twitter. (Additional reporting by Marianna Parraga in Mexico City Editing by Marguerita Choy)

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