“The rigged embargo operations against Citgo also affect US oil operators, which does not seem to bother Trump,” Mision Verdad.
The rash on the hands of the White House against Venezuela is amplified and deepened by the targeted asphyxiation by financial operators against the main Venezuelan asset in the United States: Citgo Petroleum, a subsidiary of PDVSA.
This has recently transpired, through information published by the Reuters agency, serious aggressions by which the US has begun to deal with Citgo, creating problems which translate into an oil embargo, not openly declared but rigorously executed against the petroleum assets of Venezuela. According to six traders and other banking sources consulted by the agency, the action consists of creating obstacles that make it difficult for Citgo, a company specialized in crude oil refining, to obtain lines of credit necessary to buy oil and thus sustain the diet of its refineries in Texas, Lousiana and Illinois
It is necessary first to point out that Citgo’s consumption for its refining activities totals about 759 thousand barrels/day. Citgo’s three refineries in the US are owned by Venezuela, but the light crude oil diet on which these refineries depend, means that about half of that oil is purchased from USA, Mexico or Canada. Those purchases are necessary for maintaining its refining and fuel generation activities destined for the US market. According to the Reuters report, the current choking operation results in fewer oil suppliers who are willing to sell the light crude to Citgo on an open credit liine, instead requiring prepayment or bank letters of credit to supply its refining network. This destabilizes the crude oil trading operations that benefit Citgo and thus, Venezuela.
Sources told Reuters that Citgo-related companies for crude supplies have been rejected in recent weeks after seeking letters of credit from a list of banks suggested by PDVSA and Citgo. These include Citibank, JP Morgan, Credit Suisse, BNP Paribas, ABN Amro and Deutsche Bank. In short, powerful structures of the global financial elite, with a consolidated history of financial attacks against Venezuela now run this financial hedge.
What are the direct implications for Citgo?
Two sources from Canadian suppliers told Reuters that their companies are no longer able to trade with Citgo directly, and have begun selling their product through third parties to avoid “credit risk.” The outsourcing of Citgo’s purchases and its subjection to intermediation would in essence make the purchase costs of oil much higher. If financial problems increase the cost of obtaining the needed light crude from the US, Canada and Mexico, Citgo’s profits will be reduced, causing the company to see its incomes and operational capabilities impoverished. The purchase of petroleum by letters of credit are subject to obstacles and this means that refinery supplies of crude oil in many cases could wait in limbo until the payment becomes effective. Of course this also increases costs.
This situation places Citgo within a framework of financial vulnerability. Although the operations of Citgo allegedly would not be compromised by an alleged exception in Trump’s decree, in fact the oil embargo against Venezuela, implemented through the US financial framework broadly applies exceptions to the lines of credit of the Venezuelan state and subsidiary of PDVSA. The interdiction into the financial relationships between US and Venezuelan assets through Trump’s sanctions inhibits the development of regular operations and imposes discretionary criteria, which for Citgo translates into additional costs and difficulties for the development of its operations.
Not only Citgo is affected
The rigged embargo operations against Citgo also affect US oil operators, which does not seem to bother Trump. Eulogio del Pino recently reported a situation in which a tanker with Venezuelan oil was stranded on the Louisiana coast. That was the case of the refining company PBF Energy which had already taken on Venezuelan crude. For that load, the refiner owed PDVSA 100 million dollars that were to be paid with credit notes which the banks refused to deliver, resulting in the crude not being unloaded from the tanker at the terminal.
Del Pino clarified that Pdvsa already had a buyer for the stranded oil but it was a problem that could only be solved by those by the US. This action ended up affecting the refining company PBF, according to Del Pino who explained that the US “was trapped in its own blockade against Venezuela.”
The sanctions, Citgo and their direct effects against Venezuela
On August 25, President Donald Trump imposed a set of sanctions against Venezuela through an Executive Order, in which the financial operations of repatriation of the profits generated by Citgo are impeded. This stifling economy amounts to a direct attack on domestic finance, as Citgo has provided nearly $ 2.5 billion in dividends to its parent company in Venezuela since 2015, according to Fitch Ratings.
The joint measures of Donald Trump and those that are directly arrayed against Citgo by presidential decree, are trying to push the Venezuelan economy to insolvency. They are betting that Venezuela will default in the international bond market, in addition to preventing foreign currency from entering the country. Obviously, this is very important because of its correlation with Venezuela’s system of imports and national purchases of essential goods.
It is noteworthy as a paradoxical element in the framework of Trump sanctions, that these measures of siege and asphyxia to the Venezuelan economy are executed on the narrative of the “economic and humanitarian crisis” in Venezuela a well known US-style intervention scheme by the country that carries out coups d’état in favor of “democracy” around the world, the same one that executed the “humanitarian bombing” on Libya.
All this came about came one day after the Venezuelan government and the domestic opposition launched a new round of dialogue with multilateral and regional governments to try to shield the country from international economic aggression. With this action and the financial sanctions in the background, the US openly puts on the table their intention to deliver a financial blow against Venezuela, with a view to overthrowing chavismo by force. Their intention is clear: to prevent political solutions through dialogue and to block the resulting confrontation.
By Mision Verdad
Translated by Les Blough, Editor, Axis of Logic