The Texan-based oil giant, Citgo might fall into Russian hands, if the Venezuelan State-owned oil company, PdVSA wishes to do so.
OPEC member, Venezuela’s new $5 billion bond deal with Russia’s Rosneft has raised eyebrows in America. In a surprise move this week, the economically sanctioned Latin American country issued sovereign bonds for the first time in 5 years, to tune and flow $5 billion into its cash-strapped economy.
The deal included a separate decision by the Caracas government to pledge a nearly 50% stake in Citgo. The U.S. refinery is a subsidiary of PdVSA, and was inked as collateral for a loan from Russia’ state controlled energy company, Rosneft.
Petroleos de Venezuela SA (PdVSA) is also a major U.S. oil refiner, and in theory could find its assets seized by Russia. If anything goes of the rails, the Russians will call the tune and pick up the pieces. The Russians are very smart and know how to structure air-tight deals in cases like this.
Citgo has a major oil refinery in Corpus Christi, Texas, but also owns a 200.000 barrel per day oil refinery in the Dutch Caribbean island of Aruba.
While the Citgo tie up may put investors and market analysts on notice, investors mainly invest in dollar-denominated bonds issued by PdVSA. The main external risk are the global oil prices.
Apart from Russia, Venezuela is also very likely to continue to have the support of China, which view the country as a long term investment, having the largest proven oil reserves in the world.
CNBC / AA Magnum News 2017.