CARACAS, Venezuela -- Six top CITGO executives, including the acting president, were arrested in Venezuela last week on corruption charges, according to multiple news reports. Based on the recent actions, Venezuela’s political and economic woes, as well as those of state-run oil company Petroleos de Venezuela SA (PDVSA), threaten to trickle down to Houston-based CITGO Petroleum Corp.
While based in the United States, CITGO is owned by CITGO Holding Inc., a subsidiary of Caracas-based PDVSA. Through CITGO and its three refineries, the Venezuelan government is the largest foreign owner of U.S. domestic refinery capacity. The refineries account for about 4% of domestic fuel capacity and are major suppliers of gasoline, diesel and jet fuel through a network of pipelines and terminals across 24 states.
Independent CITGO-branded retail marketers sell motor fuels through approximately 6,000 gas stations and convenience stores in 30 U.S. states.
CITGO's acting CEO and president, Jose Pereira, and five vice presidents were detained on Nov. 21 on suspicion of embezzlement over a $4 billion agreement to refinance company bonds, reported the Associated Press, citing Venezuela’s chief prosecutor Tarek William Saab. Pereira was vice president of finance at CITGO from 2013 until Nov. 13, 2017. He has Venezuelan citizenship and U.S. permanent residency. The five are U.S. citizens: Tomeu Vadell, vice president of refining operations; Alirio Zambrano, vice president and general manager of Corpus Christi refinery; Jose Luis Zambrano, vice president of shared services; Gustavo Cardenas, vice president of strategic shareholder relations, government and public affairs; and Jorge Toledo, vice president of supply and marketing.
The U.S. Department of State has asked the government of socialist Nicolas Maduro for access to the Venezuelan-American executives detained in Caracas, a State Department official told Reuters. President Maduro has acknowledged the U.S. request, but he vowed that the executives would be tried as “corrupt, thieving traitors,” said a Reuters report.
“I filed a complaint before [Saab] on the serious crimes of treason, corruption and surrendering of the homeland’s assets that were being committed by the CITGO company,” Maduro said. “Enough of treason against the revolution and against our people; enough of these homeland traitors disguised as chavistas. They were going to steal CITGO from us. I didn’t know that some of these executives had U.S. citizenship. Some of them had already been denounced by Wikileaks as CIA collaborators.”
A CITGO official told CSP Daily News, “At this time, we are looking into the current investigation related to CITGO officials by the Venezuelan Prosecutor’s Office to better understand the situation. We are monitoring the situation very closely and are using the full strength of our resources to bring prompt resolution to this matter. Our priority is to protect the interests of our company and our employees. CITGO is a U.S.-based company that operates independently, and to the standards and regulations set in the U.S. We have procedures in place to ensure ongoing operations and the continuous supply of product to our customers.”
Last week, Maduro appointed Asdrubal Chavez, the cousin of the late president of Venezuela Hugo Chavez, as the new president of CITGO in the United States.
“Asdrubal Chavez is going to restructure, recover and strengthen our Venezuelan capital and investment company in the United States. Asdrubal assumes this restructuring process starting now,” Maduro said.
This week, Maduro appointed Major General Manuel Quevedo as People’s Minister of Petroleum and president of PDVSA. This appointment will bring more military officials into the senior ranks of PDVSA, reported Reuters.
The arrests of the high-ranking CITGO executives in Venezuela also come amid a wider “anti-corruption” sweep in Venezuela’s oil industry. Approximately 50 PDVSA managers have been arrested since August, Reuters said. Sources told the news agency that the arrests owe more to Maduro’s move to sideline rivals and increase his control of money-making companies.
The arrests also come as Venezuela has been declared in selective default after some late payments.
Relations between Caracas and Washington have long been tense, said Reuters. They have further soured under President Donald Trump since his administration imposed economic sanctions that have impeded the OPEC nation’s access to international banks.
Venezuela has offered Russian state-run oil company Rosneft nearly half the shares in CITGO as collateral for the $1.5 billion Rosneft loaned the nation in 2016 as its current economic crisis was beginning. Russia could take control of CITGO and possibly gain the ability to affect U.S. retail gasoline prices if PDVSA defaults on the loan.
The Trump administration is ready to block Rosneft from gaining control of critical energy assets in the United States.
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