March 14, 2019 / 9:03 PM / 2 months ago

UPDATE 2-U.S. acts to keep Citgo operating in face of Venezuela sanctions

(Adds details on extension, bond payment, background)

WASHINGTON, March 14 (Reuters) - The U.S. Treasury on Thursday gave U.S. refiner Citgo Petroleum Corp a further 18 months to buy crude and make debt payments while under sanctions against its parent, Venezuelan state-run energy firm Petróleos de Venezuela (PDVSA).

The United States levied sanctions in January on PDVSA and Venezuela aimed at the removal of socialist President Nicolas Maduro, whom the United States and about 50 other countries no longer recognize as the country’s legitimate leader.

The sanctions prohibited Citgo and other companies from making payments for oil revenue directly to Venezuela, but have limited the Houston-based refiner’s ability to refinance debt.

“This extension will further enable Citgo’s ongoing operations while prohibiting any benefit from flowing back to the illegitimate Maduro regime,” the Treasury Department said in a statement.

The license extension would allow Citgo to use money held in escrow under earlier sanctions to make a $71 million interest payment due in April on state oil company PDVSA’s 2020 bonds, according to people familiar with the matter. Part of Citgo has been put up for collateral on that bond.

A Citgo spokeswoman did not respond to requests for comment.

Citgo cut ties last month with its parent company and accepted a new board of directors for itself and PDV Holding that were backed by the Venezuelan congress.

The updated license provides an 18-month authorization that renews automatically on a monthly basis, the Treasury said.

Washington charges that Maduro’s 2108 re-election was a fraud and recognizes opposition leader Juan Guaido, the head of the country’s congress, as the interim president. Maduro, who controls government institutions and the military, calls Guaido a U.S. puppet who is trying to foment a coup.

The sweeping financial sanctions against PDVSA were the strongest measures yet against Venezuela’s vital oil sector. U.S. companies doing oil business with Venezuela have been ordered to divert payments to special blocked accounts.

Also on Thursday, a senior Trump administration official said Washington was considering financial sanctions that could prohibit Visa Inc, Mastercard Inc and other financial institutions from processing transactions in Venezuela. (Reporting by Tim Ahmann and Gary McWilliams; Editing by Richard Chang and Peter Cooney)

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