CITGO: Where Big Business meets National Crisis

Source: BBC World
Source: BBC World

Turmoil in Venezuela has been an ongoing reality for the past several years and one company in particular is now caught in the crosshairs between their own government’s bad behavior and world-wide sanctions and condemnation. Citgo is t]he U.S. subsidiary of the state owned Petróleos de Venezuela, S.A (PDVSA) in Venezuela, which is wholly owned by Venezuelan President Nicolás Maduro, whose past election was marked by widespread ballot and voter fraud.[1] Citgo is also, “the eighth largest US refiner, with a 750,000-barrel-per-day refining network capable of supplying 4 percent of the country’s fuel through a network of some 5,000 gas stations in 30 states.”[2]

Last month Washington recognized opposition leader Juan Guaidó, the leader of the National Assembly, as the rightful head of state, as opposed to Maduro.[3] The U.S. had found themselves not in ideal company by failing to denounce Maduro. Most countries either support Guaidó or are calling for new fair elections in Venezuela, the only outliers being those with more authoritarian regimes themselves, such as China, Russia, Iran, Syria, Turkey and Cuba.[4] Previously, the U.S. has been taking the route of applying smaller sanctions targeted at government officials and smaller sectors of the economy.[5] Recently, more sweeping regulations finally targeting the oil industry in Venezuela will by far hurt Maduro the most, as Maduro owns most of the oil industry through PDVSA and the petroleum industry makes up more than 90% of the government’s revenues.[6] Furthermore, because the U.S. makes up about 41% of Venezuela’s oil exports, this sanction is substantial enough to hurt Maduro and his government.[7]

However, the U.S. is relatively late to the game in its decision to rebuke Maduro as the rightful president and target the oil industry. This could be because, like many other large corporations, PDVSA tried to win the favor of the Trump administration from the beginning of their tenure. The state-owned oil company gave Donald Trump a $500,000 USD contribution to his inauguration which was made through its Texas-based refinery business, Citgo.[8] The administration’s shift could be caused by the mounting global pressure in response to Maduro’s government’s corruption and civil rights abuses. Maduro has now been deemed by over 50 countries to be the “illegitimate” President of Venezuela[9] and Colombian President Iván Duque recently commented that Maduro was “losing support by the hour.”[10] It is also likely the imprisonment of several Citgo executives, who are U.S. citizens, contributed to the Trump administration’s decision to rebuke and sanction Maduro. For the past several months, six U.S. Citgo executives have been jailed in Venezuela on corruption charges.[11] Their hearings have now been postponed twelve times for no stated reason and the executives feel they are being held merely as political bargaining chips.[12]

Given the quickly-deteriorating relationship between Venezuela and the U.S., Citgo is quickly seeking to cut ties with its imperiled parent company. Citgo has indefinitely stopped payments to PDVSA, subscriptions to corporate services, and email communications and new Citgo board of directors was appointed this month.[13] In response, Maduro later announced he will launch political and legal action in U.S. and international courts to PDVSA’s U.S. subsidiary under its control.[14] Despite Citgo’s push to become a solely U.S. company and avoid oncoming crippling sanctions stemming from its ties to Maduro, Citgo supports Guaidó and may rely on him and the National Assembly for financing.

A $71 million USD interest payment on PDVSA notes will become due in April of 2020.[15] Failure to pay the loan could trigger a creditor rush to seize Citgo.[16] This bond is the only Venezuelan debt yet to default.[17] Previously, Maduro prioritized these debt payments because a 50.1% stake in Citgo Holdings is being held as collateral.[18] Because of the pro-Guaidó change in the board of directors and the disassociation of Citgo from PDVSA, Maduro no longer has an incentive to pay the bond since he’s already lost control of Citgo.[19] Guaidó now seeks to undertake PDVSA’s debt obligation and ensure that it does not default and has proposed working with the U.S. to set up an escrow account to ensure that the April payment and all future payments are made.[20] Even if Citgo successfully escapes PDVSA and Maduro’s grasp, if Guaidó is unable to find a way to meet these obligations, Citgo could be torn apart by a mad rush of creditors and a potential source of stabilizing revenue for Venezuela could vanish.

Citgo’s future is as uncertain as Venezuela’s. However, if Citgo is to become a U.S. company, it could further deprive Venezuela of a major asset capable of helping the nation crawl out of its economic hole.[21] Furthermore, harsh sanctions and even potentially an embargo[22] could have a hard-hitting impact on US markets, as refineries would be forced to purchase oil from more expensive sources.[23] Ultimately it seems the best outcome is for the U.S. government to work with Guaidó in order to keep Citgo from being consumed by its creditors or taken back by Maduro. In turn, this will allow assets to flow back to inste]ad of bleeding out of Venezuela.

  1. Kevin Sullivan, ‘Losing Support by the Hour’: Venezuela’s Maduro will be out of Power Soon, Colombian President Says, Wash. Post (Mar. 3, 2019, 6:11 PM),
  2. Marianna Parraga, Citgo Formally Cuts Ties with Venezuela-based Parent Company: Sources, Reuters (Feb. 26, 2018, 12:30 PM),
  3. Daniel Gallas, Venezuela Crisis: Why US Sanctions will Hurt, BBC World (Feb. 2, 2019),
  4. US Hits ‘Corrupt’ Venezuela Oil Firm PDVSA with Sanctions, BBC World (Jan. 29, 2019),
  5. Gallas, supra note 3.
  6. Id.
  7. US Hits ‘Corrupt’ Venezuela Oil Firm PDVSA with Sanctions, supra note 4.
  8. Venezuela State Oil Company Gave Cash to Trump Inauguration, BBC News (Apr. 20, 2017),
  9. Ben Bartenstein, Fabiola Zerpa & Lucia Kassai, Guaido Is Seeking to Make Payment on Citgo-Backed PDVSA Bond, Bloomberg (Feb. 28, 2019, 9:30 AM),
  10. Joshua Goodman & John L. Mone, Jailed Citgo Executives in Limbo Amid Venezuela Turmoil, ABC News (Feb. 19, 2019, 4:48 PM),
  11. Id.
  12. Parraga, supra note 2.
  13. US Hits ‘Corrupt’ Venezuela Oil Firm PDVSA with Sanctions, BBC World (Jan. 29, 2019),
  14. Bartenstein, supra note 9.
  15. Id.
  16. Id.
  17. Id.
  18. Id.
  19. Id.
  20. Daniel Gallas, Venezuela Crisis: Will the US Target Oil Exports?, BBC World (Jan. 27, 2019), (noting that the Venezuelan economy is “half the size of what it was in 2013).
  21. Id.
  22. Id.