Plans for an eventual sale of shares in US-based refiner Citgo to pay off debts incurred by Venezuela can proceed despite sanctions, a US court ruled this week.
Judge Leonard Stark of the US District Court in Delaware ruled that the court could authorize such a final sale despite long-standing US sanctions against Venezuela, as long as it is approved by the US executive branch.
Yet the US-based subsidiary of Venezuela's PdV oil company, controlled by a US-backed opposition government, said it will continue to fight the sale plans.
"We will continue to defend the assets of the republic in every scenario," the ad-hoc PdV board (PdVH) posted on social media.
But it saw some portions of the ruling as positive, particularly that all debtors will not be treated equally or on the same track, possibly delaying any eventual seizures.
"The balance is positive," PdVH said.
Debtors are seeking a payment of around $2bn.
Stark's latest decision to proceed with the sale affects debtors Huntington Ingalls, ACL, and Owens Illinois, while debtors ConocoPhillips and defunct Canadian mining company Crystallex — whose shares are now held by Tenor Capital — will be addressed separately.
At the heart of the case is the figure of "alter ego," roughly meaning that a company now controlled by Juan Guaido, whom the US recognizes as Venezuela's interim leader, needs to cover debts incurred by Venezuelan president Nicolas Maduro. Maduro borrowed about $1bn using Citgo shares as collateral in 2016.
Stark did not fully endorse the argument in his latest decision, PdVH said.
"In the published decisions, Judge Stark notes that he cannot conclude on alter ego's determinations and even indicates that he is inclined to deny the seizure requests of Owen Illinois, Huntington Ingalls and ACL," PdVH said.
In 2018 Delaware ruled that Citgo's close control by the Venezuelan government made the US refining company liable for Maduro's debts. But US sanctions in 2019 to support opposition leader Guaido further complicated creditor efforts to extract compensation through US litigation.
Any exchange of bonds or shares recognized in the US requires Treasury Department approval, giving the executive branch a final say on the court outcomes.
