Treasury Tug-of-War on Venezuela Stirs Confusion on Wall Street
13 Aug 2019

Donald Trump’s executive order last week to shield Venezuelan assets in the U.S. was supposed to be a blow to the Maduro regime. Instead, it’s left Treasury officials grumbling and investors more puzzled than ever.

The source of the confusion is Houston-based refiner Citgo Holding, Venezuela’s crown jewel abroad, which isn’t even mentioned in the three-page directive. Advisers to National Assembly President Juan Guaido, recognized by the U.S. and more than 50 nations as Venezuela’s rightful leader, had urged the White House for months to issue such an order — to no avail.

Guaido’s nightmare has been that state oil giant Petroleos de Venezuela defaults in October on a $913 million bond payment and creditors seize the collateral — a 50.1% stake in Citgo. The threat has intensified due to declining political support from Venezuelan lawmakers and a deepening cash crunch as the months-long power struggle against Nicolas Maduro’s government drags on.

So after the order on Monday, the 35-year-old opposition leader immediately claimed victory: “CITGO and all its assets are protected,” he wrote in a tweet. His attorney general, Jose Ignacio Hernandez, took it a step further, saying it didn’t make much sense to make the bond payment now that Citgo was safe. Guaido’s team had been privately assured by Treasury officials that the refiner was protected, according to four people familiar with the matter.

But some inside the Office of Foreign Assets Control, Treasury’s sanctions arm, weren’t pleased. OFAC officials told creditors that they could still foreclose on the Citgo shares if PDVSA defaults on its 2020 bonds, as previous licenses made clear, two people familiar with the matter said.

By Ben Bartenstein, Bloomberg, 12 August 2019

Read more at Bloomberg

Photo: Wilfredo Rodríguez [CC BY-SA 3.0], via Wikimedia Commons

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