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Trump administration eyes transferring control of Citgo to the new Venezuelan government it has recognized

A refinery owned by Citgo is shown June 12 in Sulphur, La.
A refinery owned by Citgo is shown June 12 in Sulphur, La. (Jonathan Bachman/Reuters)

The Treasury Department plans to claim Venezuela’s U.S.-based international reserves and state-owned assets — including oil refiner and distributor Citgo — on behalf of the newly recognized government headed by opposition leader Juan Guaidó, removing them from the control of President Nicolás Maduro.

In a vaguely worded statement issued late Friday, Treasury said that “the United States will use its economic and diplomatic tools to ensure that commercial transactions by the Venezuelan government, including those involving its state-owned enterprises and international reserves, are consistent” with its recognition of the Guaidó government.

U.S. and officials on both sides in Venezuela made clear that the reference was to Citgo and other assets in this country.

Guaidó spoke Friday of managing and “appointing new heads” of “ministries, Citgo, and PDVSA,” the state-owned oil and petroleum industry. “We of course have many brilliant names for each of these posts, so don’t worry, Venezuelans, we have the best plan for our country that is possible,” he told a cheering crowd of thousands gathered in Caracas’s Plaza Bolivar.

Maduro warned that “Citgo is the property of the Venezuelan state. We are the only ones who can decide its fate.” He spoke at a news conference at the Miraflores presidential palace.

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Since the administration announced Wednesday that it would recognize Guaidó, the elected head of Venezuela’s National Assembly, as the new head of an interim government, administration officials at Treasury and the Justice Department have been trying to determine legal and effective ways to keep resources from Maduro while funding the new government.

Trump national security adviser John Bolton said Wednesday that the administration was focused on “disconnecting the illegitimate Maduro regime from the source of its revenues,” which he said “should go to the legitimate government.”

The total size of Venezuela’s foreign assets, including those lodged in the United States, is not known. Venezuela has significant gold reserves lodged in Germany, Britain and Turkey — although none of those countries has moved as far as the United States in recognizing the Guaidó government, and Turkey has spoken in support of Maduro.

But Venezuela’s biggest source of revenue is Citgo, a U.S.-based corporation headquartered in Houston. It operates three refineries, along with dozens of terminals and pipelines across the United States, and more than 5,000 gas stations in 30 states. It employs more than 3,000 people in this country.

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Through corruption and inefficiency, Maduro’s government has driven Venezuela deeply into debt — primarily to Russia and China, which have collected on their loans primarily with prepaid oil shipments. The United States, which buys about half of Venezuela’s dwindling output — a heavy crude refined primarily in the Citgo-owned U.S. refineries — is virtually the only Venezuelan customer that pays in cash.

But transferring ownership of Citgo — and collecting profits — are more easily said than done.

Allowing the opposition to name Citgo’s board and take effective control of the company could be one way for the Trump administration to force Venezuela to institute a self-imposed oil embargo. If Caracas knew that its oil sales would go straight into the coffers of the opposition, Maduro, assuming he is still in control of the oil fields and security services, could simply stop sending oil to this country.

In recent days, industry observers say that Venezuela has already sought euro-denominated bids on 4 million barrels of oil that it would typically sell in the United States.

The administration has long threatened to impose oil sanctions on Venezuela but has hesitated because of the possible impact on U.S. supply at a time when President Trump has claimed credit for cheap prices at the pump.

Citgo is also deeply in debt to private bondholders in this country. U.S. and other companies, whose Venezuelan assets were expropriated by the socialist government, have won several court cases and moved to seize Citgo in payment. At the same time, the Russian oil giant Rosneft owns a lien for 49.9 percent of the company, issued in exchange for an earlier $1.5 billion loan to the Maduro government.

In the event Citgo falls into opposition control, PDVSA could simply stop making bond and loan payments — allowing the Russians and private bondholders to seek to legally attach its assets in U.S. courts or potentially force it into bankruptcy.

“That’s what the question is now: Does the U.S. government protect the asset for the opposition?” said Russ Dallen, a Florida-based managing partner at the brokerage Caracas Capital Markets, who said that, in his opinion, it would be “the right thing to do.”

Anthony Faiola in Rio de Janeiro contributed to this report.