U.S. Court to Decide Who Will Control Citgo

Maritime Activity Reports, Inc.

June 26, 2019

AdobeStock / © Renaschild

AdobeStock / © Renaschild

A U.S. court will decide whether a board of directors appointed by Venezuelan President Nicolas Maduro or one backed by his rival, opposition leader Juan Guaido, runs the eighth-largest U.S. refiner, Citgo Petroleum Corp.

A lawsuit filed by Maduro's representatives on Tuesday in Delaware Chancery Court seeks to reassert control over Citgo , along with other U.S. subsidiaries of PDVSA , the Venezuelan state-run oil company.

Citgo, Venezuela's most important foreign asset, has been caught in a tug-of-war as U.S. President Donald Trump's government has tried to use the firm as leverage to topple Maduro.

The lawsuit wants the court to recognize the five-person board handpicked by Maduro as legally appointed, a move that would give the socialist leader control over Citgo's nearly $30 billion in revenue.

Guaido, head of Venezuela's opposition-controlled legislature, assumed a rival interim presidency in January, denouncing Maduro as a usurper who had secured re-election in a vote widely considered fraudulent.

In February, the Guaido-led congress appointed an ad-hoc PDVSA board with rights to nominate new directors for its U.S. units PDV Holding, Citgo Holding and Citgo Petroleum. But Maduro retains the support of the military and still controls PDVSA and most state functions.

As president, Maduro has full authority under PDVSA's bylaws to name its boards of directors, the lawsuit states. It notes that the Guaido-appointed board has already been invalidated by Venezuela's Supreme Court, which remains loyal to Maduro.

Luisa Palacios assumed the position of Citgo's chairwoman under Guaido and has been running the company, which is looking for a new chief executive officer. The firm's previous government-appointed head, Asdrubal Chavez, lost control of Citgo and his Venezuelan board members were fired.

"PDVSA and its wholly owned subsidiaries are currently experiencing a crisis of leadership due to multiple parties asserting the right to name the board," the complaint said.

The action against the Palacios-led group seeks "to determine the proper composition" of the boards for Citgo and the other two units.

Citgo said in a statement that it is "confident that U.S. courts will respect" Guaido's recognition by Washington as the legitimate representative for Venezuela with authority to name directors.

"This complaint is a frivolous effort to use the courts to litigate the foreign policy judgments of the President of the United States," it added.

PDVSA did not immediately reply to a request for comment.

Washington imposed sanctions on Venezuela and PDVSA in January, in a move aimed at curbing oil exports and upping the pressure on Maduro to step aside. Since then, shipments have declined about 40%.

Reporting by Jonathan Stempel

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