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Who owns Venezuela's oil and debt?



The significance of this unanswered question became even clearer last month when Guaido, the 35-year-old President of the National Assembly, failed to persuade the military to give up Maduro. An international financial chess game is now under way, with the US and more than 50 countries supporting Guaido as the nation's legitimate interim president, as well as the nations allied with Maduro.

In support of Guaido, the United States has initiated a series of sanctions to block Maduro's oil sales by the state-controlled company PDVSA (Petróleos de Venezuela, S.A.) and to channel funds into Guaido-controlled accounts.

Meanwhile, Venezuela's biggest creditors, China and Russia, are supporting Maduro and keeping an eye on their debt. Cuba has also strengthened the regime by sending thousands of security forces into free oil.

Venezuela has the largest oil reserves in the world. It also has enormous debts, and the striving of its creditors for payment is a major factor in the global divide in Venezuela.

The rampant inflation has made the Venezuelan currency virtually worthless, and oil is the main means of repaying creditors. The problem is that its oil supply is valuable only if it can be extracted and processed ̵

1; and the crumbling infrastructure of the country simply can not produce enough oil to serve as security for the entire debt registry.

  Venezuela Fast Facts
Due to mismanagement and nationwide blackouts, oil production declined by more than 3.5 million barrels a day in 1998 – a year before Chavez came to power – in March 2019 back to 750,000 barrels a day from Rystad Energy. Between these and stringent sanctions, Venezuela's current oil sales are far from increasing enough to meet the country's foreign exchange needs or loan commitments. More than half of the current production is already earmarked for the repayment of debts and therefore can not be sold in cash on the free world market.

"The total debt is more than six times the annual exports, in fact the ratio is" With the decline in exports, the situation is deteriorating significantly this year. No one expects Venezuela to pay its debts, and the situation is very poor compared to the number of barrels that actually generate cash flow, "said Francisco J. Monaldi, the Latin American Energy Fellow. That's what the Baker Institute at Rice University in Houston tells me , Texas.

  In this photo published by the Miraflores Press Office, Venezuela's President, Nicolas Maduro, in the middle.

Monaldi notes that even the economically depressed South Sudan has a much better debt-to-exports ratio.

Anyone landing in Venezuela's presidency will join huge debts that are going to be hard to repay, even if oil production is rising fast. " Accounting for Venezuelan debts is that there are very different estimates. It's at least $ 130 to $ 140 billion, but it can be up to $ 160 billion, depending on how you put all the arbitration and decisions against Venezuela together "the money that Venezuela owes airlines and others," says Monaldi.

"Mortgaged"

US President Donald Trump, himself a veteran of multiple bankruptcies, calls Russia and China major contributors to Venezuela's financial debacle. On May 1, he told Fox Business, "The advantage (Venezuela has) is that they have oil, it's mortgaged to the detriment of China and Russia, they've just sucked money out of everyone." (Venezuela) Pledged When you think about what to do, you basically talk about partitioning the country. "

Overall, Venezuela could owe China more than $ 55 billion and Russia at least $ 17 billion, estimates Moises Rendon, a former Venezuelan Bank Analyst, now Associate Director of the Americas Program at the Center for Strategic and International Studies, Washington, DC

China has given more than $ 60 billion to Venezuela since 2007, most in return for the promised repayment of Oil. Russia has also granted considerable loans to Venezuela and sold arms on credit. Both countries are already slowly reducing their debt by accepting oil deliveries.

And the Maduro regime has not figured out how to raise foreign exchange by pumping more oil for sale for dollars into the open market, without the creditors, who are still owed more oil, loud.

Prior to US sanctions, PDVSA Venezuela rallied dollars by selling nearly 500,000 barrels of oil per day to its Citgo subsidiary, the US-based refinery headquartered in Houston, Texas and headquartered in Delaware. Citgo was so important to Venezuela that its bonds are the only debt issued by the government to creditors. But the US sanctions have put Citgo's board under the control of Guaido supporters and separated his bank accounts to block Maduro's access.
  Tank wagons are seen on March 15, 2019 in Maracaibo, Venezuela.
Even Citgo's inventory is burdened by dealings with creditors. In order to guarantee repayment to investors who bought $ 7.1 billion of Citgo bonds to be repaid in February 2020, investors were given a primary lien on 50.1 percent of Citgo shares. The remaining 49.9 percent of Citgo's shares are pledged to Russian oil company Rosneft, which will receive $ 1.5 billion in credit.

"The Maduro government no longer controls Citgo, so they will not pay anymore," Monaldi predicts the US-enforced takeover of Citgo's board by Guaido loyalists. "The Russians have a harder hand, they have to convince a (US) judge to have the shares auctioned to get a repayment." Citgo in Houston declined to request comments by email or by phone.

PDVSA itself has more than $ 40 billion in outstanding debt, much of which is currently in default. It is unlikely that a Maduro or Guajido government can or would soon repay the PDVSA loans to companies that support and provide oil drilling services, shipping and marketing to countries like Russia and China believe a new regime will meet their needs would – and this argument is crucial. Frank A. Verrastro, a longtime US oil manager and government official who now serves as Senior Vice President at the Center for Strategic & International Studies, says Russia's and China's economic concerns could potentially affect Maduro's support.

"Especially for the Chinese, if you ever want to pay back the money that Venezuela owes you, is not it better to deal with a new government that is solvent than the Maduro government?" says Verrastro.

Joel Guedes, an IPD Latin America Energy Advisor who has worked for PDVSA for more than two decades, tells me a key question is, "Can a Guaido-controlled government offer China and Russia a better repayment plan?" [19659029] Venezuelan Opposition Leader and self-proclaimed President Juan Guaido speaking at a meeting in the auditorium of the Chamber of Commerce of Caraca. "src-mini =" // cdn.cnn.com/cnnnext/dam/assets/190516144329-guaido-celebra-cese-embajada-washington-venezuela- small-169.jpg "src-xsmall =" // cdn.cnn.com/cnnnext/dam/assets/190516144329-guaido-celebra-cese-embajada-washington-venezuela-medium-plus-169.jpg "src-small = "http://cdn.cnn.com/cnnnext/dam/assets/190516144329-guaido-celebra-cese-embajada-washington-venezuela-large-169.jpg" src-medium = "// cdn.cnn.com /cnnnext/dam/assets/190516144329-guaido-celebra-cese-embajada-washington-venezuela-exlarge-169.jpg "src-large =" // cdn.cnn.com/cnnnext/dam/assets/190516144329-guaido- celebra -cese-embajada-washington-venezuela-super-169.jpg "src-full16x9 =" // cdn.cnn.com/cnnnext/dam/assets/190516144329-guaido-celebra-cese-embajada-washington-venezuela-full- 169.jpg "src-mini1x1 =" // cdn.cnn.com/cnnnext/dam/assets/190516144329-guaido-celebra-cese-embajada-washington-venezuela-small-11.jpg "data-demand-load =" not-loaded "data-eq-pts =" mini: 0, xsmall: 221, small: 308, medium: 461, large: 781 "/>

"The Chinese are reluctant to continue providing additional financial aid as Venezuela and PDVSA already owe them a lot of money, and the Russians are in the same situation," says Guedes ,

"The Russians and Chinese basically keep the Maduro regime alive, and the opposition also understands that it wants to honor financial obligations with every creditor, and of course the creditors must be part of the solution, not part of the problem." [19659017] So far, Guaido's parallel administration measures may not have won the trust of all creditors. It has announced that it will seek annulment of a nearly $ 9 billion payment to Conoco-Phillips, which was awarded in March last year in a World Bank arbitration.

Likewise, the Guaido legal team has informed judges in Pennsylvania and Delaware that it will try to stop the Canadian Crystallex company forcing Citgo shares to sell Citgo shares for an arbitration award of $ 1.2 billion.

When Maduro is replaced by a new government, the legitimacy of many of the financial deals negotiated by the Chavez and Maduro regimes over the last 20 years is called into question. This can be challenged in international litigation, Rendon emphasizes, as debt deals are never challenged Venezuela's National Assembly – which was considered by Guaido's followers as the only legitimate government official body – came first.


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