As crisis-plagued Venezuela struggles to pay its bills at home and abroad, foreign creditors are circling one of the country's most valuable assets: Citgo, the Houston-based oil company that it has owned since 1990.
If Citgo is seized and sold to pay Venezuela's debts, it could disrupt one of the most reliable sources of cash for a country already reeling from hyperinflation, food and medicine shortages, and a population exodus. U.S. sanctions aimed at pressuring President Nicolás Maduro, who has overseen the worst of the country's implosion, have exacerbated the government's pain, largely blocking it from the U.S. financial system.
The fight over Citgo is unfolding in courtrooms and boardrooms across North America and Europe - with a key decision expected by the end of the year.
Two Canadian mining firms are trying to acquire parts of Citgo as compensation for Venezuela's expropriation of their assets more than a decade ago. A Russian oil company and holders of bonds issued by Venezuela's state oil producer have staked a claim to Citgo shares. ConocoPhillips suggested it may also pursue the company.
In August, a federal judge in Delaware gave a bankrupt Canadian gold-mining company, Crystallex International, permission to seize shares of Citgo's holding company, a decision that Venezuela's lawyers lamented would "trigger a cascade of adverse events."
Now the other creditors are waiting to see whether the judge allows Crystallex to begin selling those shares - which could trigger even more claims on Citgo.
Venezuela faces more than $10 billion in immediate claims from foreign entities. "The pool of creditors is much larger than the pool of available ways to get paid," said Russ Dallen, a Florida-based managing partner at the brokerage Caracas Capital Markets. "Citgo is the most valuable asset out there."
Citgo's Gulf Coast refineries are big buyers of Venezuela's crude oil. The Houston company is one of the few customers from which Venezuela can expect same-day payments, Dallen said. It is possible that a new Citgo owner would carry on buying from Venezuela with little interruption, but it's also possible that new ownership would destabilize those purchases, he said.
Oil exports account for more than 90 percent of Venezuela's hard-currency earnings. That money is "absolutely necessary for keeping the regime afloat," said Monica de Bolle, director of the Latin American studies program at the Johns Hopkins School of Advanced International Studies. Disrupting it "would tighten the noose around the Maduro regime."
Petróleos de Venezuela (PDVSA), the state oil company that owns Citgo, appealed the Delaware court ruling, saying it could "jeopardize the financial well-being" of PDVSA and Citgo. PDVSA and the Venezuelan Communication Ministry did not respond to requests for comment.
Citgo was founded in 1910 by American businessman Henry Doherty and traded hands a few times before PDVSA bought full control. Citgo owns refineries in Texas, Louisiana and Illinois and pipelines and petroleum distribution terminals across the United States. The company sells fuel to Citgo-branded gasoline stations that are owned by local entrepreneurs.
U.S. sanctions have reduced Venezuela's ability to benefit from Citgo, barring the firm from sending dividends to Caracas. The United States did not issue sanctions preventing Venezuela from selling oil to Citgo because the U.S. market depends on those imports.
Creditors' tug of war over Citgo is unfolding as Venezuela's economic crisis deepens. Malnutrition and poverty are soaring, power and water infrastructure is failing, and inflation is rocketing toward 1 million percent. Venezuelans are fleeing their broken nation by the hundreds of thousands in the region's largest migrant crisis in decades.
The country's oil industry, meanwhile, is crumbling. Drill sites and pipelines are being raided by bandits and failing because of mismanagement and a lack of spare parts. Oil output has slumped to levels not seen since at least the 1950s.
Amid the breakdown, Venezuela and PDVSA last year stopped making payments on some of their foreign debt, which probably exceeds $150 billion, according to Siobhan Morden, head of Latin America fixed-income strategy at Nomura Securities. Firm figures on the country's debt are unavailable because Caracas has stopped reporting that data, she said.
The country is also facing large claims from foreign companies whose mining and oil assets were nationalized under the previous government of Hugo Chávez, the leftist firebrand who died in 2013.
In 2016, an international arbitration panel ruled that Venezuela owed Crystallex $1.2 billion plus interest as compensation for nationalizing the Las Cristinas gold mines, a seizure that pushed Crystallex into bankruptcy.
With the Delaware court ruling, PDVSA was found liable for Venezuela's debts, and Crystallex was granted permission to take over the state oil company's shares in a subsidiary that owns Citgo Holding. The court told Crystallex to hold off selling the shares until it fielded objections from other parties.
Banks and pension funds that hold $1.5 billion of PDVSA bonds secured by a majority stake in Citgo Holding have requested a delay in the share sale until the appeal is decided.
The Russian state-controlled oil company, Rosneft, which holds 49.9 percent of Citgo Holding as collateral against loans it provided to PDVSA, also stepped forward, saying a change in Citgo ownership could give it the right to sell that collateral.
And ConocoPhillips, which is trying to recover $2 billion from PDVSA in connection with Venezuela's oil industry nationalization, asked the court to delay the share sale, saying the appeal ruling could make Citgo available to PDVSA creditors like itself.
Citgo isn't the only Venezuelan asset creditors have pursued. This spring, after winning a $2 billion arbitration award against PDVSA, ConocoPhillips tried to seize Venezuelan crude oil in storage facilities across several Caribbean islands. The move disrupted Venezuela's crude exports and left the country scrambling to bring its tankers back into national waters to protect them from seizure.
Andre Agapov, chief executive of Vancouver-based Rusoro Mining, said he traveled to Caracas this summer to speak with Attorney General Reinaldo Muñoz about recovering a $1.4 billion debt related to Venezuela's nationalization of gold-mining assets.
This month, Rusoro said it had reached a settlement with Venezuela for $1.28 billion.
Until Venezuela begins paying the mining company, though, Rusoro is continuing to pursue a court case in Texas to lay claim to Citgo assets, according to Jay Kaplowitz, a lawyer for the company. That case won't be withdrawn "until after the first payment is made," he said.
The Washington Post's Rachelle Krygier in Caracas contributed to this report.
WASHINGTON - As gruesome details of Jamal Khashoggi's alleged killing and dismemberment at the hands of Saudi operatives trickled into the public domain this week, calls sounded in capitals around the globe for immediate retaliation to the apparent human rights atrocity.
But President Donald Trump has remained dogged about the bottom line.
In days of private phone calls and Oval Office huddles, Trump repeatedly has reached for reasons to protect the U.S.-Saudi relationship, according to administration officials and presidential advisers.
Trump has stressed Saudi Arabia's massive investment in U.S. weaponry and worries it could instead purchase arms from China or Russia. He has fretted about the oil-rich desert kingdom cutting off its supply of petroleum to the United States. He has warned against losing a key partner countering Iran's influence in the Middle East. He has argued that even if the United States tried to isolate the Saudis, the kingdom is too wealthy ever to be truly isolated.
And he has emphasized that although Khashoggi had been living in Virginia and wrote for The Washington Post, the dissident journalist is a Saudi citizen - the implication being that the disappearance is not necessarily the United States' problem.
Secretary of State Mike Pompeo jetted home Wednesday to Washington after hearing Saudi denials in Riyadh and Turkish accusations in Ankara that Khashoggi was killed by Saudi agents. Trump's top diplomat received a firsthand briefing from Turkish authorities but did not listen to the audio recording that Turkish officials say offers a ghastly rendering of Khashoggi's killing and proves he was murdered inside the Saudi Consulate in Istanbul.
Pompeo also did not offer reporters traveling with him any deeper clarity into how the Trump administration would address the conflicting accounts, but suggested any possible U.S. response would weigh its "important relations" with Saudi Arabia.
Trump said his administration has asked for an audio recording "if it exists," expressing doubt about the evidence. U.S. intelligence officials, speaking on condition of anonymity to discuss sensitive matters, said they had no reason to doubt that Turkey has an audio recording proving what officials claim. But the lack of a review by U.S. analysts makes it difficult for the administration to offer an independent assessment about who may be responsible for Khashoggi's murder, the officials said.
Meanwhile, Senate Foreign Relations Committee Chairman Bob Corker, R-Tenn., said the administration had "clamped down" on sharing intelligence about the Khashoggi case. He said an intelligence briefing scheduled for Tuesday was canceled and he was told no additional intelligence would be shared with the Senate for now, a move he called "disappointing."
"I can only surmise that probably the intel is not painting a pretty picture as it relates to Saudi Arabia," Corker said. Based on the earlier intelligence he had reviewed, he added, "Everything points not to just Saudi Arabia, but to MBS," referring to Crown Prince Mohammed bin Salman. "This could not have happened without his approval."
The Khashoggi episode has seen a two-week cycle of delay and deterrence on the part of Trump, a president known to act on his impulses.
Trump repeatedly has insisted on an unhurried response and largely has followed the cautious counsel of Pompeo, now one of his most trusted confidants. A senior White House official said that Trump dispatching Pompeo to Saudi Arabia showed how seriously he is taking the issue.
National security adviser John Bolton and, to a lesser extent, senior adviser Jared Kushner also have helped shape Trump's Saudi strategy. Kushner, who has cultivated a close relationship with the prince, has emphasized internally the importance of Saudi Arabia to prospects for Middle East peace, officials said.
The hesitation and friendly engagement with the Saudis has underscored Trump's view of American power: a transactional approach that prioritizes geopolitics and economic interests over human rights and democracy.
Explaining the administration's position, former House Speaker Newt Gingrich, R-Ga., said: "People would like to see something done because it's horrific. But it's not bad enough to make the Iranians happy and screw up the global economy. Who is going to put this high enough on the list of priorities that it suddenly overwhelms everything else that is going on?"
After a Monday call with King Salman, Trump first floated the idea that "rogue killers" somehow may have broken into the Saudi Consulate and murdered Khashoggi. And after Pompeo was photographed Tuesday morning smiling with Saudi monarchs in one of Riyadh's ornate palaces, Trump went so far as to cast the royals as victims of a global push to make them culpable.
"Here we go again with, you know, you're guilty until proven innocent. I don't like that," Trump told the Associated Press on Tuesday, invoking a comparison with sexual-assault allegations against Supreme Court Justice Brett Kavanaugh.
Marc Short, who ran legislative affairs in Trump's White House until departing this summer, said, "Saudi Arabia has created a real problem for itself."
"Our condemnation should be unequivocal," Short said. But he said the relationship is complicated, as it has been for previous administrations. "I think he's more concerned about the strategic alliance than anything else," he said of Trump.
A chorus of lawmakers, including some prominent Republicans, argued this week for more forceful action.
"Just because a country we're working with did it doesn't mean the U.S. can just shrug its shoulder and say, well, nothing happened here," Sen. Marco Rubio, R-Fla., said Tuesday on CNN. "Human rights is worth blowing that up, and luring someone into a consulate where they're there by murdered, dismembered and disposed of is a big deal."
The Senate could enact sanctions against Saudi Arabia even if Trump objects, just as it did last year in passing sanctions against Russia with a veto-proof 98-2 vote.
"If [the Saudis] try to stonewall what happened or provide excuses that simply aren't credible, this isn't just up to the president to decide," said Leon Panetta, who served as defense secretary and CIA director in the Obama administration. "I think the Congress will step forward and take steps that will in fact damage the relationship."
Trump has long viewed his relationship with the Saudis through the prism of money. He regularly boasts of Saudi's commitment to buy $110 billion in U.S. arms, though that figure is misleading because it includes agreements reached by the Obama administration as well as sales that may not materialize for many years, if ever.
At a recent fundraiser at the Trump International Hotel in Washington for the Protect the House committee, Trump complimented Riyadh on being pretty and claimed the Saudis had spent $50 million cleaning it for his arrival. He also complained about how much the United States spends to support Saudi Arabia, according to an attendee.
"Ah, those schmucks," the attendee recalled Trump saying, noting that he elicited laughter from the audience.
Back in August, Trump told a group of chief executives at a dinner at his golf course in Bedminster, New Jersey, that he had told Saudi officials - whom he called his "friends in the Gulf" - that the United States was protecting them and therefore should not have to pay such high prices for oil, according to someone in attendance. Trump singled out oil baron Harold Hamm for his opinion, and Hamm said the oil supply needed to grow for prices to drop, the attendee said.
Dan Eberhart, an oil executive and prominent GOP donor who did not attend either gathering, said that while some lawmakers are demanding the administration sanction Saudi Arabia, Trump is fixated on keeping oil prices down and therefore hesitant to act.
"The U.S. is counting on Saudi Arabia to make up for the drop in Iranian production and cover for the Venezuela situation," Eberhart said. "The Saudis may not be in the mood for either if the U.S. cancels arms sales or initiates sanctions."
Trump's personal financial ties to Saudi Arabia are coming under scrutiny as well. The president falsely claimed in a tweet Tuesday that he has "no financial interests in Saudi Arabia," even though his real estate business has sold properties to wealthy Saudis, and Saudi visitors have stayed at his hotels while he has been president.
A group of Democratic senators on Wednesday called for a full disclosure of Trump-Saudi transactions and for freezing all business during the Khashoggi investigation.
With pressure mounting to punish Riyadh, the president is exercising an uncharacteristic amount of caution. And for Trump, the Saudi arms purchases are top of mind.
"The president is trying to introduce a little calm into this, to wait and see who's directly responsible," said Rudolph Giuliani, Trump's private attorney. "While he makes clear he doesn't approve of what has happened, it's complicated because this isn't a pure enemy he's dealing with, like if Iran did it . . . He sees those contracts out there with Saudi Arabia as not just money, but jobs."
Giuliani said Trump is not naive about Mohammed's authoritarian moves to consolidate power inside his kingdom, recalling that the president privately expressed concern about the crown prince's methods after he jailed a number of critics and royal family members last November.
"I know the bloom is off the rose with the crown prince," Giuliani said. "The president way back then started to have a more complex view of him."
In floating the notion of "rogue killers" and defending Saudi monarchs this week, Trump broke with key U.S. allies who have been united in emphasizing grave concerns about the missing journalist and calling on the Saudi regime to provide clear answers.
"European leaders were clear in their joint call for journalistic freedom, a credible investigation and accountability for any wrongdoing," said Amanda Sloat, a Europe scholar at the Brookings Institution. "In stark contrast, the American president chose to parrot Saudi denials and pitch an unsubstantiated and improbable explanation."
Trump's openness to accepting a rogue-killing theory threatens to solidify suspicions that the president would accept far-flung conspiracy theories if they prove convenient.
"Europeans see the President Trump as willing to brazenly bend the truth to accomplish his objectives, without any sense of shame or fear of discovery," said Jeremy Shapiro, research director at the European Council on Foreign Relations.
Gingrich said Trump is trying to find a balance.
"Trump is good enough reading this to know you can't have people going around the planet cutting people up," he said. "But the U.S. almost certainly won't go through self-flagellation like some in Congress want us to because it's not in our self-interest."
- The Post's Shane Harris, John Hudson and Carol D. Leonnig contributed to this report.