U.S. Investors Seek Permission to Acquire Rosneft Lien in Citgo

A group of U.S. investors is seeking Washington’s approval to acquire the nearly 50 percent collateral in U.S. refiner Citgo held by Rosneft, Russia’s largest state-owned energy firm, according to one of the investors.

Such a move would not allow for Moscow to seize a large portion of the U.S. refiner in case a full-blown default by its current owner, Venezuelan state oil company PDVSA, happens. Citgo, based in Texas, operates a 749,000 barrel per day refining network in the U.S.

As a result of the country’s economic devastation caused by the five-year-long recession, Venezuelan President Nicolas Maduro has turned to ally Russia for the money it needs to survive, in exchange for prized state-owned oil assets.

Reuters writes that Rosneft has snapped up some coveted oil fields in Venezuela, getting control over the OPEC nation’s crude exports. Venezuela handed Rosneft ROSN.MM the 49.9 percent collateral in Citgo PDVSAC.UL in return for a $1.5 billion loan two years ago. The remaining 50.1 percent of shares in Citgo is collateral to holders of PDVSA’s 2020 bond.

However, in recent months Venezuela has been late on bond payments due to a constant decline in oil output, the country’s main source of income. Rosneft has been under U.S. sanctions since 2014, a means of punishing Russia for aggression in Ukraine. Some U.S. senators have warned that if Russia takes a stake in Citgo, those sanctions may be violated.

According to the investor, the group of investors applied in October for a license from the U.S. Treasury’s Office of Foreign Assets Control (OFAC) to assume the lien. The request has been given basic technical approval but the Trump administration is yet to give the group an answer.

“The administration should recognize that if it doesn’t do something pro-active here, it will face…limited options under almost any scenario, whether it is an attempt to foreclose by the current lienholder, further restrictions on Venezuelan crude oil imports into the U.S., or even in the event there is a positive political change in Caracas,” the investor said.

Under the plan, the investors would repay the outstanding loan balance and require that Rosneft terminate its lien and assign the loan to the new investors.

“This is a private sector solution to a public policy problem,” the investor added.

Be the first to comment

Leave a Reply

Your email address will not be published.