WASHINGTON -- With Venezuela experiencing a severe economic crisis that has sparked massive protests, U.S. lawmakers have expressed concerns recently “over potential vulnerabilities in critical U.S. energy infrastructure” if a financial transaction between state-owned Petroleos de Venezuela SA (PDVSA) and Russian oil company Rosneft results in Russia gaining control of CITGO Petroleum Corp. and giving Russia the ability to possibly affect “the flow and price of gasoline for American consumers.”
As reported in a CSP Daily News Flash, PDVSA last year used 49.9% of CITGO shares as collateral for a $1.5 billion loan from Rosneft. If the Venezuelan government defaults on its debt obligation to Rosneft, the Russian government could become the largest foreign owner of U.S. domestic refinery capacity after PDVSA, lawmakers said in letters earlier this month to U.S. Treasury Secretary Steven Mnuchin.
Rosneft has acquired other PDVSA bonds on the open market that could bring its ownership to more than 50%, according to U.S. Sens. Bill Cassidy (R-La.), Marco Rubio (R-Fla.), Bob Menendez (D-N.J.), John Cornyn (R-Texas), Dick Durbin (D-Ill.) and Ted Cruz (R-Texas). “This could leave Rosneft, a Russian company controlled by oligarchs with close ties to Russian President Vladimir Putin, in control of critical energy infrastructure in the United States,” they said in an April 4 letter.
On the deadline, April 12, Venezuela made approximately $2.2 billion in payments, according to a Reuters report.
Calling Venezuela “practically a failed state,” U.S. Reps. Jeff Duncan (R-S.C.) and Albio Sires (D-N.J.) said in an April 6 letter that “it is doubtful that [Venezuela] will be able to continue honoring [its] debts long term.”
“This situation, if left unchecked, could severely undermine U.S. national security and energy independence,” they said. “Such a development would give the Russians more control over oil and gas prices worldwide, inhibit U.S. energy security and undermine broader U.S. geopolitical efforts.”
The lawmakers have requested that the Committee on Foreign Investment in the United States (CFIUS) review the matter and monitor the potential acquisition of critical oil infrastructure by a Russian company. Moscow-based Rosneft has been under U.S. sanctions since 2014 over Russia’s annexation of Crimea and its involvement in Ukraine. The sanctions block it from foreign financing and projects with Western companies.
CITGO, based in Houston, is a refiner, transporter and marketer of transportation fuels owned by CITGO Holding Inc., a subsidiary of PDVSA, the national oil company of the Bolivarian Republic of Venezuela. Through CITGO, the Venezuelan government is the largest foreign owner of U.S. domestic refinery capacity. It owns three U.S. refineries (in Texas, Louisiana and Illinois) and a large network of pipelines and terminals across 24 states.
The company did not respond to inquiries on the matter from CSP Daily News by press time.
Independent CITGO-branded retail marketers sell motor fuels through approximately 6,000 gas stations and convenience stores in 30 states.
Henry Doherty founded Cities Service Co. in 1910. The company introduced the name CITGO in 1965. Occidental Petroleum bought Cities Service in 1982, and it incorporated CITGO as a refining, marketing and transportation subsidiary in 1983. The Southland Corp. bought CITGO in 1983 to ensure an adequate supply of gasoline to its 7-Eleven convenience-store chain. In 1986, Southland sold a 50% interest in CITGO to PDVSA, which acquired the remaining 50% in 1990.
Industry observers have speculated about a PDVSA sale of CITGO for years. PDVSA officials have even hinted at the possibility of a sale. CITGO officials have denied such speculation.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.