Weekly Report - 04 May 2023 (WR-23-18)

VENEZUELA: US drops protection for Citgo parent company

In a move that could have long-lasting consequences for the Venezuelan oil sector, officials from the US Justice Department revealed on 30 April that the Office of Foreign Assets Control (Ofac) would not block a sale of shares in PDV Holding – the parent company of Citgo, the US subsidiary of Venezuela’s state oil company Petróleos de Venezuela (Pdvsa). The announcement came as a Delaware district court is preparing an auction of shares in PDV Holding to compensate creditors seeking repayment of debt owed by the Venezuelan government. Any move to break up Citgo’s parent company would signify a serious intensification of the economic pressure being applied to President Nicolás Maduro’s government and would worsen relations between the Maduro administration and the US-allied opposition.

Citgo and PDV Holding have been targeted by a group of companies which won arbitration cases against the Venezuelan state for economic damages resulting from nationalisations. Chief among those companies are the US oil firm ConocoPhillips, which is seeking US$8.7bn, and the Canadian mining firm Crystallex, which is seeking US$970m. These claims on PDV Holding assets were upheld in rulings last year by Delaware district judge Leonard Stark, who approved a timeline for a forced sale of shares in PDV Holding.

Ofac has until now issued repeated protection orders to protect Citgo and PDV Holding from having to hand over assets, arguing that a share auction would violate US sanctions on Venezuela. Perhaps more pertinently, an asset transfer would also jeopardise negotiations between the Maduro administration and the Venezuelan opposition, given that since 2019 Citgo and PDV Holding have been run by executive boards appointed by former opposition leader Juan Guaidó. Guaidó’s ouster in January this year [WR-23-01] raised questions over whether the US would continue to protect both companies.

In a letter to the Delaware court, officials from the US Justice Department revealed on 30 April that this Ofac protection is being wound down. The letter states that Ofac will “not take enforcement action against individuals or entities for participating in or complying with the Prefatory Steps set out in the Sales Order, as well as those who engage in transactions that are ordinarily incident and necessary to participation in and compliance with such steps”.

In response, Maduro said that Ofac’s new position has laid the groundwork for the “theft of the Citgo company by the US government and the [main opposition coalition] Plataforma Unitaria de Venezuela”. His linking of the US position and the Venezuelan opposition will further weaken faint hopes for a resumption of dialogue aimed at resolving Venezuela’s political crisis, which the international community again rallied around at a conference in Colombia on 25 April that failed to produce any breakthroughs [WR-23-17].

Whilst the change in the Ofac position significantly raises the chances of Venezuelan state assets being forcibly sold off, it is unlikely that a share auction will be held imminently. US government officials have told the media on condition of anonymity that sales of PDV Holding’s assets will still require additional approval from Ofac, which will be conditional on the results of due diligence investigations which are likely to take several months.


Pdvsa responded to the decision by the US Justice Department with a statement denouncing what it described as a “policy of aggression by the US government, through unilateral coercive and illegal measures, judicial decisions, and other restrictive and punitive measures, which have caused the value of Pdvsa’s assets to fall”.

Guaidó denies plans to seek asylum

Juan Guaidó, whose expulsion from Colombia to the US on 24 April raised questions about his political future in Venezuela [WR-23-17], told journalists on 2 May that he is not planning on seeking asylum in the US “for now”. Speaking after a visit to the headquarters of the Organization of American States (OAS) in Washington, Guaidó said that he was simply “visiting” the US, although he acknowledged that returning to Venezuela would “incur risks” and that he needs to ensure his “protection and security”. Guaidó criticised the Colombian authorities for his removal from the country, saying that “I wasn’t expecting friendliness, simply the dignified treatment that any human being deserves, but unfortunately we encountered hostility and threats”.

Death in custody raises further questions over corruption purge

The corruption purge that resulted in the fall from grace of the oil minister, Tareck El Aissami, on 20 March [WR-23-12] continues to gather pace. Speaking on state television on 28 April President Nicolás Maduro claimed that since the “anti-corruption operation” was launched in March a total of 1,007 “ill-gotten gains”, including 361 top of the range cars, 38 luxury apartments, 28 mansions, and 19 private aircraft, among other things, had been confiscated, “amounting to several million dollars”.

Attorney General Tarek William Saab announced on 18 April that 80 people had been arrested so far in the crackdown, which is widely viewed as an attempt to curb El Aissami’s considerable influence – the former oil minister had powerful allies in government, the military, and the business community.

Another close ally of El Aissami was arrested on 19 April – Ysmel Serrano, a former vice president of state oil company Petróleos de Venezuela (Pdvsa) who also served as El Aissami’s right-hand man while he was governor of Aragua state (2012-2017). Serrano is alleged to have participated in the massive embezzlement of funds from Pdvsa, according to the communications minister, Freddy Ñáñez. Whilst the government has not published details on the scale of the embezzlement, documents cited by Reuters indicate that US$21.2bn has been skimmed from the state oil company since January 2020.

Questions are now being raised regarding the death in custody of one of those arrested in the corruption sweep. Saab claimed on 20 April that Leoner Azuaje Urrea, the president of state cardboard manufacturing company Cartoven, committed suicide in his cell after being accused of corruption. However, local media have cited anonymous employees at Venezuela’s forensic institute (Senamecf) as saying that Azuaje’s body bore signs of torture, including severe bruising, abrasions on his torso and arms, and wounds to the soles of his feet.

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