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BUSINESS Monday 11 February 2019
A25

U.S. refiner Citgo emerges as key

to Venezuela's power battle

By ALEXANDRA OLSON tomers, China and Russia, the sanctions, or about 26
NEW YORK (AP) — The U.S. are usually taken as repay- percent of the company's
and dozens of other coun- ment for billions of dollars total 749,000-barrel-a-day
tries may have declared in debt. So the cash from capacity. Most of the Ven-
that Nicolas Maduro is no Citgo has become a life- ezuelan oil was processed
longer the legitimate presi- line over the past two years at its Lake Charles refinery
dent of Venezuela, but that as Venezuela's oil out- in Louisiana, which is spe-
has not loosened his grip on put has plummeted amid cially equipped to handle In this Feb. 24, 2012 file photo, gas prices are posted at the Citgo
power. Maduro still controls chronic underinvestment the high-density, high-sulfur gas station in Philadelphia.
the military, despite scat- in PDVSA and oil prices crude that Venezuela ex- Associated Press
tered defections. He has have dropped from historic ports. That type of crude oil
the loyalty of the Supreme highs. is in short supply because directors for Citgo. Legally, Implementing the change,
Court. And he has ren- Until U.S. sanctions prohib- of production cuts in other there may be little stopping however, involves logistical
dered the opposition-con- ited, Citgo also repatriated countries like Mexico and him from doing so. There is hurdles. Pedro Burelli, a U.S.-
trolled National Assembly profits to PDVSA. It also sent Saudi Arabia. some precedent, as when based consultant who was
powerless by setting up a ri- back fuel that Venezuela Citgo itself is not a target the U.S. and other countries a PDVSA executive board
val constitutional assembly. needs because of its dete- of the sanctions. The Trump recognized a coalition of member until 1998, said
But Maduro stands to lose riorating refining capabili- administration carved out rebel groups in Libya as the Guaido must first appoint
one crucial lever of pow- ties, as well as diluents that an exemption for the PDV- official government in 2011 new PDVSA leaders, who
er: Houston-based refining PDVSA needs to mix with SA subsidiary so Americans when Moammar Gadhafi would then oversee the
company Citgo, a wholly Venezuela's heaviest crude can continue doing busi- still controlled Tripoli. The shareholder-voting process
owned subsidiary of Ven- oil before it can be ex- ness with it. decision gave the rebel of selecting a Citgo board.
ezuelan state-owned oil ported. But sanctions have ___ group the right to take con- But that new PDVSA lead-
company Petroleos de prohibited those exports. CAN GUAIDO PULL OFF A trol of Libyan assets over- ership would not have real
Venezuela SA, known by its Like other refiners, Citgo LEADERSHIP CHANGE AT seas. access to the bureaucracy
acronym PDVSA. can now only import Ven- CITGO? "International law allows and operations of the par-
Americans know Citgo ezuelan crude oil if it makes Guaido has said he will this to happen," Burke- ent company, which Mad-
for its familiar red triangle payments into blocked soon name a new board of White said. uro controls.q
logo at its more than 5,000 bank accounts, which al-
branded gas stations and most certainly means the
the iconic sign visible from PDVSA will halt shipments
Fenway Park in Boston. to the U.S.
Venezuelans know it as one Maduro's government also
of their collapsing econo- mortgaged Citgo to raise
my's last lifelines. cash. Almost 50 percent of
The Trump administration is the company's shares were
moving to help transfer its put up as collateral for a
control to Juan Guaido, the $1.5 billion loan from the
National Assembly leader Russian state-controlled oil
recognized by the U.S. and company Rosneft. The rest
other countries as Venezu- of the shares are collateral
ela's legitimate president. for PDVSA's 2020 bond, the
Such a feat would give only bond Venezuela has
Guaido a slice of de facto continued to make pay-
power. ments on in a desperate ef-
"It's more than symbolic," fort to hang on to Citgo.
said William Burke-White, ___
a professor of internation- HOW DO U.S. SANCTIONS
al law at the University of AFFECT CITGO?
Pennsylvania who served in Citgo itself has become a
the State Department un- little less dependent on PD-
der the Obama Administra- VSA in one crucial way. Like
tion. "An alternative power other PDVSA customers,
is starting to emerge. This the refiner has been forced
is about creating a world in recent months to look
where there is another enti- for alternative sources of
ty contesting every point of crude because of Venezu-
authority that Maduro has." ela's dramatic production
Here's a look Citgo's critical decline, said Jennifer Row-
role in Venezuela's power land, an equity research
struggle. analyst for Edward Jones
___ who focuses on the energy
WHY IS CITGO SUCH A sector.
VALUABLE ASSET FOR VEN- Still, the company faces
EZUELA? a scramble to replace
U.S. refiners like Citgo are a complete loss of Ven-
among the few customers ezuelan supply. Citgo had
paying cash for Venezue- been processing up to
lan crude. Oil shipments to 200,000 barrels a day of
Venezuela's other big cus- Venezuelan crude before