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Citgo caught between Venezuela's competing governments

Authorities reveal a second failed coup attempt, as President Maduro seeks to limit the influence of the opposition

Hostilities between Venezuela's rival governments are intensifying after President Nicolas Maduro accused conspirators of orchestrating a "fascist plot" to assassinate senior members of the United Socialist Party, including Maduro, his wife and National Constituent Assembly President Diosdado Cabello.

Communications minister Jorge Rodriguez, speaking on national television, said the plotters aimed to take military bases in Caracas, free former defence minister Raul Baduel from prison and install him as the country's president. Rodriguez identified former Brigadier General Eduardo Jose Baez Torrealba, who is based in the Dominican Republic, as the plan's primary architect.

Maduro also accused the US, Colombia and Chile of helping to support the latest coup attempt, with the alleged involvement of National Assembly leader Juan Guaidó. Authorities claimed to have gathered 56 hours of footage of the accused during a 14-month operation, including recordings appearing to show them discussing an association with Guaidó.

In April, recently freed opposition leader Leopoldo Lopez, together with Guaidó, attempted to convince the military to abandon Maduro. The coup failed, despite the support of a few high-profile individuals, including former director of the Bolivarian National Intelligence Service Manuel Cristopher Figuera, who has since fled to the US. Former national police chief Iván Simonovis, who had been imprisoned or under house arrest for 15 years, was also freed and joined Figuera in the US. Both have testified against the regime.

Authorities have been attempting to wrest further support away from Guaidó. Venezuelan human rights lobby Foro Penal reported 775 political prisoners had been arrested following the failed coup in April, and since then a further six military and police members have also been sent to prison. In May, Guaidó accused Maduro of kidnapping Edgar Zambrano, vice president of the National Assembly, and Roberto Marreno, his senior aide. Just before the announcement of the second attempted coup, Guaidó reported the attempted kidnapping of several of his aides on the Francisco Fajardo Highway.

Vital asset

Maduro is now targeting the opposition's control of US refiner Citgo, Venezuela's most important foreign asset. A lawsuit was filed by the Venezuelan authorities in Delaware against the National Assembly elected board, seeking recognition of his own five-person board.

Citgo's financial situation is precarious. 50.1pc of Citgo's shares were used as collateral for state-owned oil company Pdvsa's 2020 bonds and the remaining stake for a $1.5bn loan issued by Rosneft. Maduro continued to make payments on the bonds until sanctions prevented him access.

In May, the Guaidó-appointed Pdvsa board paid the $71mn interest payment, but in October a further $913mn interest payment is due. Today there remains high risk that bond holders will seize company shares if Citgo defaults. "Venezuela's dire economic situation will make it considerably harder to make bond payments later this year," says Amir Richani, geopolitical analyst at Clipperdata, a tanker data and analysis provider. "Failing to pay the Pdvsa 2020 bond could complicate things for the opposition and risk Citgo," he says.

Failing to pay the Pdvsa 2020 bond could complicate things for the opposition and risk Citgo” – Richani, Clipperdata

Other companies could try to take their own cut from Citgo, capitalising on the collapse of the country's oil sector and the inability of the company to service its debt. Last August, Canadian mining firm Crystallex won a $1.2bn arbitration case against Pdvsa when the company failed to honour its contract. Numerous others could potentially also come forward.

"Everybody is going to try to attach Citgo," says David Voght at IPD Latin America, a consultancy. "The bigger issue is that there is possibly not enough to go around."

Guiadó had called on the US to prevent the sale of Citgo, stressing its importance to the eventual recovery of the oil sector and the impact on US energy security should Rosneft attempt to seize it. Citgo owns three US refineries at Corpus Christi, Lake Charles and Lemont, with a combined crude capacity of 765mn bl/d.

Consultancy Baker & O'Brien highlighted in a report that post-IMO 2020 Citgo's profits could be even higher-as the company's delayed cokers are able to produce products with only a small amount of residual high-sulphur fuel oil and will likely benefit from a wider heavy-light crude differential.

Citgo has since responded to the filled lawsuit, calling it "a frivolous effort to use the courts to litigate the foreign policy judgements of the President of the United States, and we are confident that the relief it requests will be denied."

 

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