A group of U.S. investors is looking to buy the almost 50-percent interest currently held by Russian Rosneft in refiner Citgo, the U.S. unit of troubled PDVSA. The acquisition plan, disclosed by one of the investors to Reuters, will prevent Rosneft from taking control over a refining network with a daily capacity of 749,000 bpd.
Rosneft’s Citgo holding has had legislators worried since the beginning because of the strained relations between the United States and Russia. PDVSA granted the Russian company the stake in exchange for a large loan, but it has been teetering on the edge of default for over a year now, keeping U.S. stakeholders on edge with worry that the US-based refinery will fall into Russian hands.
Amid the U.S. sanctions against Russia for its involvement in separatist movements in Ukraine, PDVSA and Rosneft began talks to swap the Citgo stake for something else as collateral for Rosneft’s loan to the Venezuelan company. It seems, however, that no major progress has been made so far. Meanwhile, Rosneft is buying into Venezuelan oil fields in exchange for providing further loans to the troubled South American state. This, too, must worry some in the U.S. as it extends the clout of the Russian company in the country.
Last year, amid lots of reports about a possible default by PDVSA, two senators pressed the Trump Administration to review the chances of Rosneft acquiring PDVSA and its U.S. business, Citgo. Marco Rubio and Bob Menendez believe a change in the ownership of Citgo’s assets would constitute a security risk, Reuters reported at the time.
In a letter to Treasury Secretary Steven Mnuchin, the Republican and Democratic senators wrote that “Given Venezuela’s increasingly dire economic and humanitarian situation, we are seriously concerned with a possible acquisition by Rosneft of PDVSA and Citgo.”
The possibility of Rosneft taking over the whole of PDVSA seemed a bit far-fetched last year and is still far-fetched this year. Russia is not the Venezuelan company’s only creditor. There is China, too. If the possibility of a foreign acquisition of the state company ever emerges, a China oil giant would be just as likely a buyer as Rosneft. This possibility is, however, very remote: Venezuela depends on PDVSA’s income for its survival.
By Irina Slav for Oilprice.com