Venezuelan opposition names Citgo board
Move likely to hurt Maduro finances, eases refiner’s operations in U.S.
The battle for control of Venezuela spilled into Houston Wednesday when opposition leader Juan Guaidó appointed a new “ad hoc” board of directors for Citgo Petroleum, the U.S. subsidiary of the country’s national oil company and a significant source of revenue.
The Houston refiner has become a key piece in the geopolitical chess game among world powers as Guaidó, recognized by the United States and its allies as the legitimate ruler of Venezuela, challenges the socialist president Nicolás Maduro, supported by Russia and China. The question is whether executives at the company will follow the direction of Guaido’s board or the one loyal to Maduro.
Citgo did not respond to requests for comment, but analysts said they expect the refiner, a U.S. company operating under American laws, will recognize Guaido’s directors, all of whom live in the United States.
“Maduro can no longer call the shots,” Russ Dallen, managing partner in the New York office of Caracas Capital Markets, an investment bank. “Now, you can support the Venezuelan resistance by buying your gas at Citgo.”
The company, which operates three U.S. refineries, including one in Corpus Christi, has been caught in the crossfire of the political and economic crises in Venezuela. In late 2017, the Maduro government arrested the Citgo president and five other top executives, and has held them in Venezuela without trial for more than 14 months.
Asdrúbal Chávez, the cousin of Maduro’s mentor, the late Hugo Chavez, was named the president and CEO of Citgo, but had his visa revoked by the Trump administration in July. In addtion, the Venezuelan government and Citgo’s parent company, PDVSA, owe billions to creditors who have Citgo as collateral on loans that are unlikely to be repaid.
In January, Guaidó, the leader of the National Assembly, declared himself acting president and called for new elections after Maduro was inaugurated following elections last year marred by fraud and voting irregularities. The board appointment is another huge political move for Guaidó and the United States in trying to force Maduro from power, since Citgo has acted as a cash cow for the regime.
In a statement issued by Vene-
zuela's National Assembly, Guaidó said it was a “historic agreement” to protect Venezuelan assets.
Guaidó named Luisa Palacios, Edgar Rincon, Luis Urdaneta, Angel Olmeta, Andres Padilla and Rick Esser to Citgo's board of directors. Simón Antúnez, Gustavo J. Velazquez, Carlos José Paisa, Ricardo Prada and David Smolanski were appointed to board of Citgo’s parent company, PDVSA, Venezuela’s state-owned oil company.
First woman president
Palacios also was appointed president of Citgo, the first woman to hold that position. She is the head of emerging market research with an emphasis on Latin America at Medley Global Advisors, a geopolitical analysis firm. Esser is the vice president of compliance and Citgo’s chief strategy officer.
Analysts said the new board could replace some Citgo executives, which may lead to some complications in the transition.
“Invariably when there’s a change of that magnitude in the board,” said Fernando Valle, a senior oil and gas analyst at Bloomberg Intelligence, “so there will be some friction for sure.”
But overall the appointment should be a win for Citgo operations in the U.S. that have been hurt by oil sanctions imposed by the Trump administration to force Maduro out, analysts said.
Citgo was ordered to divert payments for the 500,000 barrels per day of Venezuelan crude oil imported to the United States into an account that Maduro cannot access, and Venezuelan crude imports have plummeted.
The sanctions choke Maduro of cash, but also pose a problem for Citgo’s refineries, particularly Corpus Christi, that ran a high percentage of Venezuelan crude prior to the sanctions.
The board appointment to Citgo should help the company more easily transition its crude imports away from Venezuela.
Without its link to Maduro, suppliers may be more willing to deal with the company, Valle said.
Russian incentive
Credit fears still linger, though. Rosneft, Russia’s state-owned oil company, has a 49.9 percent stake in Citgo as collateral for a $1.5 billion loan to PDVSA. Russians could try to seize Citgo shares if they stop receiving payments, Dallen said, particularly with a new incentive to wreak havoc on the American and Venezuelan opposition plan.
PDVSA bond holders and Crystallex, a Canadian gold and mining company owed an arbitration award from Venezuela, also pose a threat to the company’s survival. If PDVSA fails to make payments on 2020 bonds, they, too. could move to seize Citgo assets.
But analysts believe that if Rosneft or other creditors attempt to seize shares or control of the company that the United States would step in to keep it intact. The Trump administration wants to preserve the company to help support a new regime and stabilize the country if and when Maduro falls.