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US Treasury to review PdV-Rosneft deal: Update

18 May 2017 23:07 (+01:00 GMT)
US Treasury to review PdV-Rosneft deal: Update

Adds details throughout

Washington, 18 May (Argus) — The US Treasury Department plans to review a decision by Venezuela's state-owned PdV to pledge part of its US subsidiary Citgo as collateral for a loan from Russia's Rosneft.

"This, like any other national security issue, will be reviewed at the Committee on Foreign Investment in the US," treasury secretary Steven Mnuchin said today at a Senate Banking Committee hearing. The Treasury's foreign investment committee reviews transactions that could pose national security risks by turning over control of US companies to foreigners.

Mnuchin was responding to inquiries from senator Bob Menendez (D-New Jersey) and other senators and members of the House who are concerned that the deal poses a potential threat to critical US energy infrastructure.

The terms of the deal PdV and Rosneft signed last November are believed to include a $1.5bn loan from the Russian state-controlled company, backed by a 49.9pc stake in Citgo as collateral.

Rosneft is on the US sanctions list, prohibiting the company from raising funds in the US financial markets and from receiving shale, Arctic and deepwater drilling technologies.

Citgo owns three US refineries with a combined capacity of over 750,000 b/d — the 165,000 b/d Corpus Christi plant in Texas, the 167,000 b/d Lemont refinery in Illinois and the 425,000 b/d Lake Charles facility in Louisiana. It also has stakes in several pipelines and other downstream assets.

PdV earlier had pledged 50.1pc of Citgo as collateral to refinance $2.8bn of bond debt due in 2016-17.

President Donald Trump's administration, like its predecessor, is keeping to the margins, rather than confront a government that routinely invokes anti-US sentiments, despite growing unrest in a country that accounts for about tenth of US crude imports.

Violence is escalating in Caracas and other parts of Venezuela. Venezuelan president Nicolas Maduro's government has cracked down hard, especially in western Venezuela — a traditional stronghold of the opposition.

But Trump is facing calls from Congress, as well as Venezuela's neighbors, to take a more active stance. The administration today took a symbolic step of imposing economic sanctions on eight members of Venezuela's supreme court who have voted to approve the Maduro's government decisions to sideline the opposition-controlled National Assembly.

"By imposing these targeted sanctions, the US is supporting the Venezuelan people in their efforts to protect and advance democratic governance in their country," Mnuchin said.

Washington over the past year has targeted other high-level Venezuelan officials for sanctions, citing human rights violations and suspected drug trafficking.

Trump discussed the situation in Venezuela today with Colombia's president Juan Manuel Santos, who is visiting Washington.

"We will be working with Colombia and other countries on the Venezuela problem," Trump said. "We will work together to do whatever is necessary to help with fixing that, and I am really talking on a humanitarian level."

Congressional Republicans, including senator Marco Rubio (R-Florida) and US House of Representatives Foreign Affairs Committee chairman Ed Royce (R-California) have advanced legislation to expand US sanctions against the Maduro government.

But US sanctions may not work as intended, Senate Armed Services Committee chairman John McCain (R-Arizona) warned last week. "When you impose sanctions, sometimes you hurt innocent people instead of harming the government, and when you have someone like Maduro, he really does not give a damn."

"When you look at the oil reserves that they have, you sort of have to wonder why is that happening," Trump said today. "But [Venezuela] has been unbelievably poorly run for a long period of time. And hopefully that will change, and they can use those assets to take care of their people."

Venezuela's energy ministry cites Opec's latest monthly market report showing that PdV's crude output averaged 1.956mn b/d in April based on secondary sources Opec is using to measure compliance.

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