US imposes sanctions on Venezuela's PDVSA to force Nicolas Maduro to transfer power to interim president Juan Guaidó
Petroleumworld 01 29 2019
Washington today imposed sanctions on Venezuela's state-owned oil company PDV in hopes of forcing sitting president Nicolas Maduro to transfer power to Juan Guaidó, whom the US recognizes as the legitimate leader of the country.
"PdV has long been a vehicle for embezzlement and corruption for Venezuelan officials and businessmen," US treasury secretary Steve Mnuchin said. "Today's designation of PdV will help prevent further diversion of Venezuela's assets by Maduro, and will preserve these assets for the people of Venezuela where they belong."
US refiners can continue receiving Venezuelan crude until 28 April, so long as they place payments for those deliveries in escrow accounts instead of sending them to entities controlled by the Maduro government. The US wants to make the funds available to Guaidó's nascent government, once it is in position to use them.
Treasury is also issuing licenses for Venezuela's customers in the Caribbean and European countries to allow them to cut off business ties gradually.
PdV, which remains under the control of Maduro's government, said it will divert oil shipments to China, Russia, India and other clients. "We don't need the gringo market," said an official at Maduro-controlled energy ministry.
US refiners taking Venezuelan crude — imports averaged 488,000 b/d in January-October 2018 — "have already been taking steps to reduce their reliance on PdV," Mnuchin said. He said the global oil market is well supplied, and there will be no gasoline price shocks for US domestic consumers.
The sanctions on PdV will remain in place until Maduro transfers power to Guaidó, or "a subsequent, democratically elected government," Mnuchin said.
Guaidó declared himself acting president on 23 January, in his capacity as National Assembly speaker. He has pledged to hold presidential elections after assuming full control of the government. The US, Canada, most of Latin America, as well as Australia and Israel, recognized Guaidó as acting president. Russia, China, Turkey and a handful of other countries continue to support sitting president Nicolas Maduro, who maintains the backing of Venezuela's senior military ranks.
Guaidó ahead of the Treasury's announcement said he ordered the transfer of Venezuelan state accounts abroad to the National Assembly. He said he will name new board members for PdV and its US refining subsidiary Citgo, who will be tasked with restoring the embattled oil industry and keeping Citgo in Venezuelan hands.
Maduro and Guaidó are locked in battle over control of the Venezuelan government. While Maduro retains control of the military and other security forces, Guaidó is pushing for control of Venezuelan assets in the US — the primary source of Caracas' foreign exchange earnings.
Guaidó's supporters have had contacts with the Venezuelan military, White House national security adviser John Bolton said today. "The US will hold Venezuelan security forces responsible for the safety of all US diplomatic personnel, the National Assembly, and President Guaidó," Bolton said.
Guaidó appointed Carlos Vecchio as charge d'affaires in Washington. "The US looks forward to working with Mr. Vecchio and other diplomatic staff as designated by interim President Guaido," secretary of state Mike Pompeo said.
Venezuela's external creditors are waiting in the wings, most hoping for a comprehensive debt restructuring. Almost all of the debt of the Venezuelan government and PdV is in default.
Among prominent creditors is former Canadian mining firm Crystallex, now owned by New York-based hedge fund Tenor Capital Management, which is pursuing a $1.4bn arbitration claim through US courts that is targeting Citgo.
Guaidó's team has starting making informal overtures to bondholders and other creditors.
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