Judge: Canadian firm can go after Venezuela’s U.S. refineries

CARACAS, VENEZUELA — A Canadian gold mining company on Thursday won the right to go after Venezuela’s prized U.S.based oil refineries and collect $1.4 billion it lost in a decade-old takeover by the late socialist President Hugo Chavez.

Chief Judge Leonard P. Stark of the U.S. Federal District Court in Delaware made the ruling in favour of Crystallex, striking a blow to crisis-wracked Venezuela, which stands to lose its most valuable asset outside of the country — Citgo.

Chavez took over the gold mining firm and many other international companies as part of his Bolivarian revolution that’s left the country spiralling into economic and political turmoil.

Venezuelans struggle to afford food and medicine as masses flee across the border. In a sign of rising political tensions, current President Nicolas Maduro threw an opposition lawmaker in jail this week, charged in a failed assassination plot using two drones loaded with explosives.

The latest order by the U.S. judge could set off a scramble by a long list of creditors owed $65 billion from bonds that cashstrapped Venezuela has stopped paying within the last year, said Russ Dallen, a Miami-based partner at the brokerage firm Caracas Capital Markets.

“This was the most vulnerable low-hanging fruit for debt-holders to go after,” Dallen said. “It looks like Crystallex is the lucky lottery winner because they got there first.”

Chavez, in early 2009, announced Venezuela’s takeover of the Canadian mining operations in Bolivar state, a mineral rich region with one of the continent’s largest gold deposits. He accused mining companies of damaging the environment and violating workers’ rights.

Crystallex spent years trying to negotiate a deal with Venezuela before making its case in 2011 to a World Bank arbitration panel, which sided with the Canadian firm, despite Venezuela’s vigorous fight. U.S.-based Citgo, part of the state-run oil company PDVSA, has three refineries in Louisiana, Texas and Illinois in addition to a network of pipelines.

The judge’s ruling is unique, because government assets, like PDVSA, are normally protected from lawsuits against a sovereign nation. But the judge found that Crystallex can attach Citgo’s parent because Venezuela has erased the lines between the government and its oil firm, now run by a military general.