Congress Panics As US Oil Assets Could Fall Into Russian Hands If Venezuela Defaults

Tyler Durden's picture

As we noted last night, Venezuela's state-owned oil company PDVSA made principal and interest payments of $2.2 billion today, avoiding default yet again despite what Vice President Tareck El Aissami called a "ruthless economic war" being waged against the Maduro government.

 

 

That's the good news, the bad news is that PDVSA has $62 billion more in principal and interest due over the next few years...

And, as OilPrice.com's Nick Cunningham details, that has members of Congress very nervous... If Venezuela defaults on its debt obligations, it could result in Russia taking control over U.S. refining assets, leading to more Russian “control over oil and gas prices worldwide,” which would “inhibit U.S. energy security, and undermine broader U.S. geopolitical efforts.”

That is the warning from two members of Congress, Reps. Jeff Duncan (R-SC) and Albio Sires (D-NJ). The two Congressmen sent a joint letter to the U.S. Secretary of Treasury Steven Mnuchin, requesting his attention on the matter. A bipartisan group of six U.S. Senators also requested a response from Secretary Mnuchin on the matter.

They cite the fact that Russia’s government-backed oil company, Rosneft, gave Venezuela’s state-owned oil company, PDVSA, a $1.5 billion loan. As collateral, PDVSA offered up 49.9 percent of Citgo, a subsidiary of the Venezuelan oil company. Citgo owns three refineries in the U.S., along with pipelines and retail gas stations.

The Congressmen are worried that if PDVSA defaults, Rosneft will seize the U.S.-based refineries.

“The Russian government could readily become the second-largest foreign owner of U.S. domestic refinery capacity,” which would be “to the detriment of U.S. interests,” the Congressmen wrote. “[W]e remain deeply concerned over the implications for U.S. national security.”

The concerns are rather odd. What exactly would “the Russians” do with the three refineries? The Congressmen seem to be suggesting that somehow Rosneft would conspire to restrict gasoline production to drive up prices in an effort to somehow weaken U.S. national security or the American economy. Related: Is The Oil Price Rally Running Out Of Steam?

This is silly. While Rosneft is state-owned, it is also a company that would rather not lose a ton of money. Even if Rosneft somehow gained control of Citgo’s refineries, restricting gasoline production might provide some discomfort for U.S. motorists in the region, but it would be financially ruinous to the Rosneft-controlled refineries. "The Russians can't hold the U.S. hostage," John LaForge, head of Real Assets strategy at Wells Fargo, told CNN. The three refineries are also a drop in the bucket as far as U.S. gasoline production is concerned. "Other refineries would love to pick up the slack,” LaForge added. Undoubtedly, Rosneft would rather operate the refineries just like anybody else, which is to say, selling gasoline in order to make money. Russian control of Citgo’s refineries would not threaten U.S. national security.

It is hard not to conclude that the Congressmen are engaging in a bit of bluster and Russia fear-mongering, not coincidentally at a time when U.S. Secretary of State Rex Tillerson is in Moscow and U.S.-Russian relations are deteriorating. So, there isn’t much to see here.

While this ongoing development is rather trivial to U.S. interests, the stakes could not be higher for Venezuela.

The country is in the midst of a multi-year economic meltdown, with no light at the end of the tunnel.

PDVSA has a $2.5 billion debt payment due this week, and at the time of this writing, it appears that the company will be able to meet that obligation. The state also has nearly $500 million in sovereign debt payments falling due. Cash is running out, but the Venezuelan government, for better or worse, has prioritized meeting bond payments at all costs.

The state has roughly $10 billion left in cash reserves before this week’s payment (although some of that is reportedly not in cash, but in gold), and billions more in coupon payments to meet later this year. A default this week doesn’t appear likely. But it is not a given that Venezuela makes it through 2017 without a default, a missed debt payment, or some sort of debt restructuring.

According to the credit-default swap market, investors are pegging the odds of a Venezuelan default within the next six months at 41 percent, a jump from just 34 percent in March.

And, as the two U.S. Congressmen worried about the situation wrote in their letter, the state’s and PDVSA’s assets are indeed on the line. The immediate spark to the latest political crisis was the government’s negotiations with Rosneft to offer them a stake in Venezuelan oil fields. Last month, when the Congress objected, the Supreme Court – which is controlled by the ruling party – tried to neuter the legislature. That resulted in the mass protests that are still unfolding. The Venezuelan government is desperate to sell off some oil assets in order to raise cash.

The situation in Venezuela is dire, and deserves U.S. – and global – attention. But Russian control of U.S. refineries is hardly the main story here.

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GadExp's picture

 

 

 

Putin 2020!!!

SoilMyselfRotten's picture

Can't they just pass a law where we get Venezuelas oil?

divingengineer's picture

I totally don't understand, why don't we just fuck them out of the money like we do everyone else?

wren's picture

Possession is 9/10 of the law. and the banks and big oil could care less about abiding by the law. Big oil will simply hire the US Mercenary Force to kick the Russians off the property.

tmosley's picture

The obvious solution is to lend Venezuela some more than the Russians did.

Bernie Madolf's picture

Oh baby, a refi double down on remaining collateral w int only climaxing in a big balloon job!

You got me all excited

Mustafa Kemal's picture

This must be psyop russian fearmongering. As I recall, one of the reasons that Venezuela is hurting is because of US sanctions. US has been trying to destabilize Venezuela for a long time, mostly because socialism is evil.

giovanni_f's picture

A made-in-US showcase for "unintended consequences" caused by "bad policy" exacerbated by "countervailing forces" deeply rooted in a secret desire for "auto mutilation" but projected onto the evil intentions of a "foreign aggressor" endangering our "national interests" necessitating the destruction of our enemy and therefore making the bombing of Korea, Laos, Vieltnam, Serbia, Libya, Afghanistan, Iraq, Syria, Yemen, Sudan, Iran, Donbass a "patriotic duty".

It won't end well. The US is a genetically modified Nation (GMN) that cannot live wthout enemies and war. It is as if this Nation fears that peace would lead to immediate autolysis.

jcaz's picture

Gee, Maxine Waters just figure that out?

She be smart......

FEDbuster's picture

She would say Trump's to blame, and he should be impeached. 

Row Well Number 41's picture

"I totally don't understand, why don't we just fuck them out of the money like we do everyone else?"

Patience a good screw takes time.

SoilMyselfRotten's picture

When we steal their oil they have to understand it's in their best interest

Stuck on Zero's picture

Isn't the US woried about China purchasing all the world's assets?

2_legs_bahhhhhd's picture

62 billion? Pffft

The interest on the US national debt is going up 6 million/hour....50 billion a year.

sinbad2's picture

Well it seems that Russia and China have read all the training manuals on how American economic hitmen work, and their muscling in on the US market.

And the best part is, they are seen as heroes, saving the people from the American gangsters, priceless.

scaleindependent's picture

 

And while they are at it, they should pass a law where the U.S. of  A. owns the whole fuucken world.

MrButtoMcFarty's picture

Can't they just pass a law where we get Venezuelas 18-24 female ass?

Darktarra's picture

Well I guess we need to invade Venezuela now? 

GUS100CORRINA's picture

Title: Congress Panics As US Oil Assets Could Fall Into Russian Hands If Venezuela Defaults

My Response: See what you get when you train your children to be socialists.

LET THIS BE A LESSON AMERICA.

Venezuela is reeping what it has sown for decades!!!!

 

Lumberjack's picture

They are just pissed they didn't give them the loan.

BurningFuld's picture

Those fuckers in Venezuela are hiding Terrorists, Sarin Gas, Bio Weapons and I'm pretty sure they have a nuclear program.

AND not a word on here about Canada tabling legislation to legalize Pot. Where are the priorities here?

sinbad2's picture

Venezuela has been a virtual US colony since the Spanish American war.

The US didn't arrange a war with Spain for kicks, it was to steal the Spanish colonies, Cuba Haiti Philippines and Venezuela.

Castro and Chavez through a spanner into the wheels of American exploitation, which is why they are hated so much by America.

decon's picture

...it could result in Russia taking control over U.S. refining assets...

 

If you don't own them they're not your refining assest now are they.

Mustafa Kemal's picture

If your primary income is oil and the price drops 60% you are going to be hurting, even if you are a democracy, Lets also not forget the US has sanctions on them

Sizzurp's picture

What's next? Bail out for Maduro, or another war?

dark fiber's picture

Bail out Maduro.  It is a role model for our politicians after all.

silvermail's picture

Trump leads America to a war that will be America's last war in the history of its existence.
Because after this war, America will disappear.
https://tinyurl.com/k4dntou

Shemp 4 Victory's picture

I'm sure these asshat congressmen were just fine with the US policy of economically undermining Venezuela, though.

urhotdogs's picture

And, how have we done that?  Venezuela is the one that kicked out our oil companies and seized the assets.  Their incompetence put them in this mess.  Govts can't run anything

Snout the First's picture

Was it U.S economic policy that cratered Venezuela's economy? Or was it Venezuela's socialist policies?

djsmps's picture

Doesn't ISIS have a cave network in Venezuela.

divingengineer's picture

I bet the Maduro regime is hoarding WMDs.

ParkAveFlasher's picture

Maybe they can stop monkeyhammering the gold price and begin to exchang- naaaaah

1.21 jigawatts's picture

Up next:  Venezuelan hackers

saldulilem's picture

Only ZH can translate 'two congressmen concerned' into 'Congress panics'. LOL, thanks I needed that.

michigan independant's picture

The fact remains, Russia is now the #1 oil producer in the world. They despise that all oil is traded on the exchanges through US dollars only. This is US dollar hegemony and its abuses by the Federal Reserve of inflating its supply have been called on by the G8 and the G20. The Russians want the end of US dollar hegemony. There won't be a clean end to it's power, making this one of the biggest reasons Russia is secretly preparing for war. Do you really think the US would not defend that? When the common man thinks guns, tanks and technology are his greatest weapons, instead of what every army general knows, that deception is the greatest weapon, leads the general population of sheeple to err in sleep, unaware of the real danger ahead. January 16, 2011

You are lower than slaves and marked.

orangegeek's picture

Russia is a dictatorship - Russia always had oil and other natural resources, but chose geocide and cruelty to their people over business.

 

FUCK PUTIN!!!  Russia is the largest oil producer because the US allows it.

earleflorida's picture

funny when all the oligarchy 'jews' controlled russian energy it was 'o'kee`doke'...

but that was kosher

Slippery Slope's picture

No problem, I'm sure Russia would be willing to sell to the assets to us, for GOLD

cougar_w's picture

Great! Let's not pass up a golden opportunity to open yet another front in the war for oil.

earleflorida's picture

siberia to alaska and how the icbm flies

~3k miles  [give or take a hundred]

SHADEWELL's picture

They fly 3k miles inbound to moscow as well

Keep that in mind

scaleindependent's picture

Thanks for putting my mind at ease.

orangegeek's picture

If Venezuela defaults on its debt obligations, it could result in Russia taking control over U.S. refining assets, leading to more Russian “control over oil and gas prices worldwide,”

 

such fucking bullshit - the communist turds confiscated US oil interests

 

the US was working to destablize Venezuela ever since

 

and the US will be taking back what is there's with a nice obedient puppet goobmint installed

 

as always.