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Citgo Faces Potential Upheaval Under Venezuela's Political Changes

Citgo Petroleum, a unit of Venezuela's state oil company PDVSA, could experience changes to its supervisory board due to Friday's vote by Venezuela's National Assembly to dissolve an interim government and appoint a commission to oversee the country's foreign assets, including Citgo.

CITGO logo over a city in US
CITGO logo over a city in US

The refiner has been run by boards appointed by opposition leader Juan Guaido's Congress since 2019, but Guaido was ousted on Friday.

The United States has so far protected Venezuela's foreign assets, including Citgo, from being seized by creditors seeking to recover unpaid debts. However, a set of U.S. executive orders preventing the auction of shares in Citgo's parent company are set to expire next year. The loss of a clear interim leader in Venezuela could jeopardize this protection, according to the U.S. government.

There is also the possibility of a new legal battle over the legitimacy of Citgo's board of directors. In 2019, President Maduro unsuccessfully challenged the board appointed by Guaido. However, a federal court in the U.S. later ratified the executives appointed by Guaido to run Citgo. These executives have changed several times in the past four years, leading to managing uncertainty.

Creditors have pursued claims and lawsuits seeking to auction Venezuela-owned assets, including Citgo since the company severed ties with its parent, Petroleos de Venezuela, which is controlled by Maduro. Despite this, Citgo is on track for a $2.5 billion profit this year due to high fuel prices and global shortages caused by Russia's invasion of Ukraine. The company plans to use the profit to repay debt and invest in the reliability of its operations.

Earlier this year, most opposition parties in Venezuela approved a deal to transfer authority over board appointments from Guaido to a new super-advisory council. However, this entity still needs to be formed. Lawyers advising Citgo's supervisory boards have warned of the challenges of presenting a new government structure to U.S. courts, and some have argued that the proposed changes are unconstitutional. The new government structure could also lead to a loss of embassies and entities representing and defending Venezuelans and Venezuela-owned assets in other countries.

U.S. National Security Council Comments on Citgo and Venezuela's Interim Government

A spokesperson for the U.S. National Security Council stated that President Joe Biden's administration will continue to support Venezuela's interim government "regardless of what form it takes." The spokesperson did not comment on whether this support includes extending protection to Citgo under the new government structure.

Venezuela's interim government, led by opposition chief Juan Guaido, has mostly been powerless at home due to President Maduro's control over nearly all institutions, including security forces. However, Guaido's government has supervised the country's foreign assets and many embassies. The U.S. has blocked efforts by creditors to seize these assets to recover unpaid debts owed by Venezuela, including efforts by a U.S. judge to hold an auction of shares in Citgo's U.S. parent.