A decision regarding Canadian miner Crystallex’s request to sell the shares of PDV Holdings, the parent company of refiner Citgo Petroleum Corp., which is owned by Venezuela, was expected by the end of July. Now it is likely to be made sometime in August.
This, after US Justice Department lawyers asked District Judge Leonard Stark in Delaware, where Citgo’s parent is incorporated, not to bless Crystallex’s request to sell the shares until US regulators finish examining the deal.
Crystallex is aiming at collecting a $1.4-billion-award in compensation following a decade-long dispute over Venezuela’s 2008 nationalization of its gold mine in the southern Bolívar state. The amount is comprised of $1.2 billion, plus $200 million of interest awarded by a World Bank arbitration tribunal in 2016.
But according to the Justice Department lawyers’ filing, approving the share sale would harm US foreign policy and national-security interests in Venezuela.
In a similar tone, Elliott Abrams, President Donald Trump’s special representative to Venezuela, sent a letter to the Attorney General and the Justice Department stating that Crystallex cannot sell the shares without a license from the US Office of Foreign Asset Control.
These moves back arguments by lawyers for Venezuelan interim president Juan Guaidó, whose team wants to honour the debts with Crystallex but opposes the sale of Citgo’s assets to protect one of the country’s main sources of hard currency.
However, according to economist Francisco Rodríguez, founder of the think-tank Oil for Venezuela, the Guaidó government has a steep hill to climb.
1. Para entender el peligro de pérdida de CITGO ante los acreedores en procesos judiciales y la discusión sobre la responsabilidad de diversos actores públicos en ella, es importante entender los detalles de los procesos judiciales en curso. Abro hilo explicativo.
— Francisco Rodríguez (@frrodriguezc) July 11, 2020
Once it was recognized by the US and other 50 states as the Venezuelan legitimate government, the new administration had to prove that there is a separation between the state and Citgo’s management.
In a series of explanatory tweets, Rodríguez said that the Guaidó government’s ability to prove this separation was severely affected when Venezuela’s National Assembly named Citgo’s board of directors on February 13, 2019. This was supposed to be done by Citgo Holding’s board of directors.
“President Guaidó published a tweet that same day announcing the appointment of Citgo’s new board of directors. He used a format that was very similar to the announcements made by [Nicolás] Maduro which were used months ago by Crystallex as evidence against Venezuela,” Rodríguez said. “Not surprisingly, just a few weeks after, Crystallex filed a legal brief arguing that violations to [the principle of] corporate veil were ongoing under Guaidó and that, therefore, the court should reject any argument related to the way the company is being managed.”
The economist argued that the importance of these mistakes should not be overlooked. On top of having named the board of directors, later on, in July 2019 and June 2020, Citgo Holding and Citgo Petroleum issued, without the approval of Venezuela’s National Assembly, debt bonds whose warranties were the country’s assets.
These issuances, which were made by officials named by the interim government of Juan Guaidó, are now being used by the creditors of the PDVSA 2020 bond to contradict Venezuela’s attempt to invalidate the warranty of these bonds for not having the parliament’s approval. The PDVSA 2020 is a collateralized bond issued by state oil company Petróleos de Venezuela S.A., owner of PDV Holdings.
Economist Francisco Rodríguez said Venezuelans should demand answers to certain questions related to this case
“In the face of the systematic repetition of these types of mistakes that endanger the strategy of safeguarding the country’s assets, Venezuelans should demand answers to certain questions,” Francisco Rodríguez said. “These questions should be part of the regular process of leading a modern democracy. There shouldn’t be any resistance from the interim government to provide a clear explanation of these issues.”
In the economist’s view, analyzing these errors would not only make the new government more transparent, which would separate it from the “obscure practices of [Maduro’s] dictatorship,” but it may also help find solutions to the complex legal position in which Venezuela finds itself.
Thus, he proposed that Guaidó and his team dig deep and respond who were the legal advisors that recommended the “unusual appointment” of Citgo’s board of directors. He said that it is also important to disclose whether these advisors are or were at any point financially tied to Crystallex or any other company that has ongoing litigation with the country.
Finally, he suggested that it would be advisable to restrict, for a certain period, the ability of people that have recently left government offices to become advisors or consultants to companies with financial interests in the Crystallex litigations.
“Only by showing a different way of leading the country we will be able to gain the trust of Venezuelans, which is needed to recover democracy,” the economist said.