(FT.com, John Paul Rathbone and Gideon Long, 13.Feb.2019) — Venezuela’s parallel, opposition government sought to take control of the country’s oil revenues from the regime of Nicolás Maduro by naming an interim board of directors to state oil company PDVSA and its most valuable foreign asset, the US-based refiner Citgo.
The nominations effectively set up parallel boards for the two companies most critical to Venezuela’s economy. They form part of a growing battle for control of the country between opposition leader Juan Guaidó and Mr Maduro, who has said he would not allow Citgo to be “stolen”.
The US and some 50 other countries recognise Mr Guaidó as Venezuela’s legitimate president, but Mr Maduro retains control of key state institutions, including the army.
“We have taken a step forwards in the reconstruction of PDVSA,” Mr Guaidó tweeted, shortly after the opposition-dominated National Assembly approved the nominations. “The new board is made up of Venezuelans who are capable, and free of corruption and party affiliation . . . The rescue of our energy has begun.”
Although the US has sanctioned Venezuela’s energy industry and explored ways to transfer state assets to the opposition, the mechanics of how the new opposition-nominated board would actually take over Citgo, let alone Caracas-based PDVSA, are unclear. Neither Citgo or PDVSA responded immediately to requests for comment.
Valued by PDVSA at $9bn, Citgo directly employs more than 3,000 people in the US and has been a major source of dollar revenue for Venezuela. Complicating Citgo’s ownership structure is a 49 per cent holding held as collateral by Russian oil company Rosneft. The remaining shares serve as collateral for a PDVSA bond.
The opposition-dominated National Assembly on Wednesday instructed the new board to “protect the assets of Citgo . . . seek out low cost alternative heavy oil supplies . . . [and] audit Citgo and investigate any possible irregularities”.
Venezuela’s energy industry is the lifeblood of its economy and key to any rebuilding effort if Mr Guaidó’s attempts to oust Mr Maduro succeed. In the meantime, however, punitive US sanctions have hindered government exports to the US, Venezuela’s largest oil market, forcing current PDVSA officials to find alternative markets.
This week Manuel Quevedo, the army general who currently heads PDVSA, was in India, trying to persuade New Delhi to buy more Venezuelan oil. He said PDVSA hoped to double output to India from its current 300,000 barrels a day, in what looked like a desperate bid to make up for lost exports to the US market.
In Caracas, Iván Freites, PDVSA union leader, meanwhile said that under a new government “there’s no reason why we can’t get production back up to 2m b/d within two years and 3m within three years”. Oil production has collapsed by a third in the past five years to just over 1m b/d. The new named officials all currently live outside Venezuela, and include Rick Esser, Citgo’s current vice-president of compliance and chief strategy officer.
Mr Guaidó invoked a constitutional provision three weeks ago to assume Venezuela’s presidency, arguing that Mr Maduro’s re-election last year was a sham. Mr Maduro responded on Wednesday, saying that: “This person, who believes that politics is a game and he can violate the constitution and the law, sooner or later will have to answer before the courts.”
In the meantime, the US and other countries are trying to channel aid to Venezuela. Mr Guaidó said at a huge rally in Caracas on Tuesday that the aid would enter Venezuela on February 23, effectively setting an ultimatum with Mr Maduro, who has refused to let the supplies in.
Mr Maduro denies there is an economic crisis despite a widespread lack of food and medicine, hyperinflation and an exodus of more than 3m refugees.