Venezuela: Delcy Rodriguez set to take control of Citgo board, sources say

The administration of Venezuela’s interim president, Delcy Rodriguez, is preparing to take control of the boards of U.S. subsidiaries of state oil company PDVSA, including Citgo Petroleum, four sources familiar with the matter said.

The move could exacerbate the power struggle for control of the seventh-largest refiner in the United States.

In March, Washington recognized Delcy Rodriguez as Venezuela’s leader following the capture of President Nicolas Maduro, paving the way for her government to reopen embassies and consulates in the United States, as well as regain control of Venezuelan businesses abroad that Maduro had lost to the opposition.

Citgo, the jewel of Venezuelan international assets, has been managed since 2019 by supervisory boards appointed by an opposition-led congress, now inactive.

Ms. Rodriguez must still finalize her lists of board members so that the US Treasury can issue them with individual clearance, with some suggested names having been warmly received in Washington, two of the sources said. If the directors are approved, the Treasury’s Office of Foreign Assets Control (OFAC) will have to issue a specific license, according to these sources.

“Treasury officials have already contacted members of the Citgo board to inform them that the new directors to be appointed by Rodriguez should be authorized, subject to approval from Washington,” said one of the sources.

The US State Department must also validate these appointments and provide policy guidance to OFAC, another source added.

The US Treasury removed Delcy Rodriguez from its sanctions list on Wednesday, which could make it easier for his administration to take over US assets.

Ms. Rodriguez’s envoys also informed some law firms that have represented Venezuela, PDVSA and its affiliates in U.S. courts in recent years that their contracts were under review and could be suspended, according to the sources.

The Venezuelan Ministries of Oil and Communication, PDVSA, Citgo and the US Departments of Treasury and State did not respond to requests for comment. The boards overseeing Citgo declined comment.

SLOW-MOTION CHANGES

PDVSA’s board of directors in March ratified Asdrubal Chavez – a cousin of former Venezuelan President Hugo Chavez – as head of all its American subsidiaries. However, Mr. Chavez, who was previously denied a U.S. visa to run Citgo from Houston, has not effectively led the companies for more than seven years.

As part of the March appointments, PDVSA also added to the boards Nelson Ferrer, Alejandro Escarra and Ricardo Gomez, executives close to Rodriguez who, in some cases, previously worked at Citgo under Chavez’s leadership.

It was not immediately possible to determine whether these frameworks would be authorized by the Treasury.

The shakeup could come as the Houston-based refiner continues to fight in U.S. courts to overturn the sale of its parent company, PDV Holding, to a subsidiary of hedge fund Elliott Investment Management.

Citgo argued in court that the auction, ordered to repay billions of dollars to creditors following payment defaults and expropriations in Venezuela, was unfair, tainted by conflicts of interest and that it reduced the value of the assets. A court officer overseeing the process denied any impropriety.

The complex auction was finalized last year after a Delaware judge approved a $5.9 billion bid filed by Elliott subsidiary Amber Energy. But the final transfer of ownership is now pending the green light from the American Treasury, which has protected Citgo against its creditors since the severing of ties with the PDVSA headquarters in Caracas in 2019, against a backdrop of American sanctions.

Elliott declined to comment. Amber did not immediately respond to a request for comment.

Ms. Rodriguez’s opinion on Elliott’s possible takeover is unclear. Previously, she had criticized the auction, calling it a “theft” of a sovereign asset.

ADDITIONAL COMPLICATIONS

Rodriguez’s allies could further complicate the already complex management of Citgo’s refining network, considered strategic to U.S. energy security.

The refiner was the subject of an investigation until 2018 by the US Department of Justice, leading to the indictment of several former employees for alleged corruption and other wrongdoing.

According to the source, the memory of the Maduro government’s arrest of six senior Citgo executives between 2017 and 2022, as well as several oil ministers still in detention in Venezuela, fuels fear of reprisals among other executives, who could resign to avoid any clash with Rodriguez.

Citgo’s current board of directors, led by Carlos Jorda, turned around the then heavily indebted company by paying off debts, reestablishing basic operations and increasing refining capacity. This year, with the approval of the United States, the company resumed its purchases of Venezuelan oil after a seven-year interruption.