Venezuela detains head of U.S. refiner
Executives detained in Venezuela are being accused of embezzlement
Venezuelan officials detain the acting president of Citgo, the state-owned oil company’s U.S. subsidiary, and five other executives for alleged involvement in corruption.
CARACAS, Venezuela — Venezuelan authorities detained the acting president of Citgo, the state-owned oil company’s U.S. subsidiary, and five other executives for their alleged involvement in a corruption scheme, officials said Tuesday.
Jose Pereira, who works from Citgo’s headquarters in Houston, and five Citgo vice presidents are suspected of embezzlement stemming from a $4 billion agreement to refinance company bonds, said Venezuela’s chief prosecutor, Tarek William Saab.
The deal provided “unconscionable and unfavorable” terms for state oil giant PDVSA and offered Citgo itself as a guarantee on repayment without prior government approval, said Saab.
Saab described the Citgo executives as facilitators for U.S. international pressure on Venezuela’s oil sector, “putting at risk Citgo’s assets while obtaining personal benefits.”
Officials at Citgo distanced themselves from the arrests, saying in a statement that the company operates independently and meets the standards and regulations set by the United States. A spokesman said the company would continue to operate normally and supply its products
to customers.
“We are monitoring the situation very closely and are using the full strength of our resources to bring prompt resolution to this matter,” a Citgo spokesman said. “Our priority is to protect the interests of our company and our employees.”
Citgo was founded as an American company more than 100 years ago but has operated as a PDVSA subsidiary for three decades. The company employs about 4,000 worker and contractors in the United States, including more than 800 in Houston. Citgo has about 160 branded gas stations in the Houston area, and about 5,500 stations nationwide. Citgo also owns oil refineries in Corpus Christi; Lake Charles, La.; and Illinois.
Saab accused the men of acting as spies for North American interests in exchange for a few dollars.
The detentions are part of an ongoing investigation by Venezuelan authorities into the country’s oil sector, which has struggled in recent years amid mismanagement and declining production. Thus far, Saab’s office has made nearly 60 arrests related to corruption involving PDVSA.
In a televised address, Venezuelan President Nicolas Maduro urged employees of the state-run oil company to stand with him in the fight against corruption and attacks from the U.S. government.
“While I’m working hard every day, there’s a group of bandits stealing from the people,” he said. “What’s that called? Treason.”
Mark Jones, a professor of Latin American studies at Rice University’s Baker Institute of Public Policy, noted that the arrests come as Venezuela is falling into a worsening economic crisis, with widespread shortages of food and medical supplies across the country. Maduro’s strategy has been to try to deflect attention from the economic crisis, Jones said.
“It’s more a political show,” Jones said. “The story they want to promote is the declining energy production (in Venezuela) is not the result of government policy. “It’s the result of corruption and unpatriotic acts by members of the PDVSA and Citgo.”
Ethan Bellamy, an energy analyst at Robert W. Baird & Co., called the arrests of the Citgo executives appalling and politically motivated.
“This self-immolation by the Maduro regime will guarantee no more foreign investment in Venezuela for a generation,” Bellamy said. “How much deprivation and starvation will this man and his lackeys inflict upon the Venezuelan people to perpetuate his cabal?”
Venezuela is under sanctions from United States and Europe and is signaling to creditors that it will not be able to continue payments on what is an estimated $60 billion in government debt. And the debt crisis is only likely to get worse as the country’s oil production, already down more than 15 percent since 2015, continues to decline because of a lack of investment in PDVSA.
The Venezuelan government and PDVSA officially defaulted on billions of dollars’ worth of bonds earlier this month. The International Swaps and Derivatives Association, a group of banks and brokers that determine whether an entity like Venezuela has failed to make on-time payments on its debts, recently voted to say that Venezuela had defaulted.
Two other rating agencies — Fitch and Standard & Poor’s — have also determined that Venezuela’s government is in default. (Fitch is majority owned by the Hearst Corp., the parent company of the Houston Chronicle.)