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American and Latin American Politics, Society, and Culture

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Venezuela hacks Hanke

Johns Hopkins professor Steve Hanke has been studying the Venezuelan economy for years as part of his Troubled Currencies Project. Last January Hanke ranked Venezuela as #1 in the world misery index for two years in a row,

Venezuela holds the inglorious spot of most miserable country for 2016, as it did in 2015. The failures of President Nicolas Maduro’s socialist, corrupt petroleum state have been well documented over the past year, including when Venezuela became the 57th instance of hyperinflation in the world.

Venezuela’s government oil monopoly company PDVSA is mortgaging its jewel in the crown, Citgo, which means the country is in big trouble.

How big?

Hanke’s team got hacked while researching PDVSA’s numbers. Monica Showalter reports,

A Johns Hopkins University professor found that Venezuela’s ruling Chavistas really, really don’t want anyone with knowledge of economics doing that.

On Thursday, they dispatched a cyberthug team to deny acess to the PDVSA state oil company website to all of Johns Hopkins University’s computers, after Steve Hanke, a professor of applied economics there, wrote extensively about the country’s failing currency and its economic mismanagement at PDVSA. Hanke told American Thinker in a phone conversation that his academic assistant had been burrowing through the muddy and obscure details of PDVSA’s financials for hours recently. For him, the ACCESS DENIED code to the page came with a rider not seen on the rest of the university’s blocked-off computers: REPEAT OFFENDER.

Hanke tweeted a screenshot,

Chavismo tries but can’t hide the facts. And the facts show the ruinous reality of 21st Century Socialism.

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Venezuela: US Senate Joins House in Call for Review of Venezuela PDVSA Deal with Russia’s Rosneft over Citgo

A very important story not covered by most media, at LAHT:
US Senate Joins House in Call for Review of Venezuela PDVSA Deal with Russia’s Rosneft over Citgo (emphasis added)

In December LAHT discovered and publicized that PdVSA had mortgaged 49.9% of CITGO as collateral for a loan it took last year from Rosneft. Rosneft could also hold other PdVSA debt that would give it a majority stake in CITGO.

Rosneft, a majority Russian government-owned oil company run by a former deputy of Russian President Vladimir Putin, loaned Venezuela $1.5 billion for the 49.9% share of Citgo in the U.S. (just under the majority change of control that would have to be reported).

Venezuela’s current economic crisis is undermining PdVSA’s financial stability, increasing the possibility of default.

CITGO operates a notable portion of the nation’s energy infrastructure with 48 petroleum product terminals in 20 states, three refineries in Texas, Louisiana and Illinois, three fully-owned Texas pipelines, and six partially-owned pipelines.

In response to this,

Six prominent Senate leaders have now joined House Foreign Affairs leaders in calling upon U.S. Treasury Secretary Stephen Mnuchin — as head of the Committee on Foreign Investment in the United States (CFIUS), a panel comprised of cabinet-level officials charged with assessing such transactions for threats to national security — to review the review the Russian government controlled Rosneft’s transaction for half of Citgo in the U.S.A.

LAHT has the documents at the above link.

Related, also at LAHT:
US Court Upholds $1.4 Billion Judgment Against Venezuela for Crystallex Expropriation. In the documents, something bondholders should be aware of,

“Crystallex is preparing to file a motion seeking an order … that Crystallex may seek to attach assets to aid in the execution of its judgment. Once that happens, Crystallex intends to seek an order directing the shares of PDVH held by Venezuela’s alter ego, PDVSA, be sold to satisfy Crystallex’s judgment.”

Prior posts:
Venezuela: Crystallex Sues Russia’s Rosneft & PDVSA Bondholders Over CITGO

Venezuela Admits Mortgaging Citgo in the USA to Russia, Goes on Attack

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Venezuela: Duncan, Sires Send Letter Urging Protection of U.S. Energy Security

In the U.S.,
Duncan, Sires Send Letter Urging Protection of U.S. Energy Security

Chairman Jeff Duncan (SC-03) and Ranking Member Albio Sires (NJ-08) of the House Committee on Foreign Affairs’ Subcommittee on the Western Hemisphere sent a letter to the U.S. Department of the Treasury urging immediate attention to a potential threat to critical U.S. energy infrastructure as a result of a recent asset transfer between Venezuela’s PDVSA and Russia’s Rosneft. This development impacts PDVSA’s U.S.-based subsidiary, Citgo, and vital U.S. national security interests.

Here’s Russ Dalen’s testimony to Congress on Venezuela’s Tragic Meltdown.

As you may recall, Venezuela’s Supreme Court granted Nicolás Maduro the power to bypass the National Assembly and approve new joint ventures with foreign oil companies. Late last December, Venezuela’s PDVSA Mortgages US Refinery Citgo to Russia’s Rosneft.

Stratfor (subscription only) analysis: The government is scrambling to find money to help the national oil company meet its debt payments and avoid a disastrous default

Standing in the way of the government strategy to ride out a default is the United States. Any moves Caracas makes to further delay elections or crack down on the opposition — necessary actions to rule a one-party state — could invite further U.S. sanctions. Venezuela’s rulers, alert to this threat, have tentatively reached out to Washington. In March, a Stratfor source said the Venezuelan government was planning to open a back channel of communication with the United States. As part of its outreach to Washington, Maduro instructed Foreign Minister Delcy Rodriguez and Venezuelan Oil Minister Nelson Martinez, the chairman and CEO of PDVSA’s U.S. subsidiary Citgo, to explore the possibility of further opening Venezuela’s energy market to U.S. corporations.

This tracks closely with media reports that emerged Monday claiming that business executives close to Donald Trump Jr., son of the U.S. president, had discussed with National Security Council officials the possibility of loosening sanctions on Venezuelan officials in exchange for business opportunities in Venezuela. The intent by Venezuelan officials appears to have been to buy them some time to decide how to proceed with regional and presidential elections. Still, the offer, made in early February, did not prevent Washington from sanctioning El Aissami that month. There also have been indications that the Trump administration may be willing to enact additional sanctions against Venezuela.

Frank Muci writes about How Chavismo Mágico is Swallowing PDVSA

In Venezuela, a college student was shot dead during anti-government demonstrations:
Venezuela clashes leave one man dead, dozens arrested in Caracas

College student dies during Venezuela protest

Youth shot dead during protest against Venezuela President Maduro

Venezuela confirms young man killed during anti-Maduro protests

Over at the National Assembly,
Venezuelan lawmakers avoid military blockade to start recall of pro-government justices

Venezuela’s national legislature Wednesday began the process of removing pro-government justices on the constitutional branch of the Supreme Court, after opposition lawmakers gathered before dawn to avoid a National Guard blockade

The opposition majority in the National Assembly, some of whose deputies were injured Tuesday in attacks by government agents, also approved a declaration that Venezuela is suffering a coup d’etat and demanding the release of all political prisoners. It also urged the Venezuelan armed forces to listen to the people’s demands for democracy.

In other news,
Liliana Tintori met with Enrique Peña Nieto in Mexico

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Venezuela: Crystallex Sues Russia’s Rosneft & PDVSA Bondholders Over CITGO

Back in 2011, Hugo Chávez unlafully experopriated Canadian gold mining company Crystallex’s Las Cristinas mine.

Following Venezuela’s acknowledging that it had mortgaged Citgo to Russia’s Rosneft, and Owed $1.4 Billion by Venezuela, Crystallex Sues Russia’s Rosneft & PDVSA Bondholders Over CITGO

After an investigation by Redd Intelligence and the Latin American Herald Tribune uncovered Venezuela’s secret mortgage of Citgo to Russia’s Rosneft, Crystallex has launched a suit against Rosneft and PDVSA’s bondholders to get CITGO back.

Canadian Gold miner Crystallex — which is owed $1.4 billion by Venezuela for the 2011 unlawful expropriation of its Las Cristinas gold mine project — on Wednesday launched suits against both Russia’s state controlled oil company Rosneft and PDVSA’s bondholders for the “fraudulent receipt” of Venezuela’s U.S. refiner Citgo in U.S. Federal Court in Delaware.

The addition of Rosneft and PDVSA’s bondholder collateral trustee GLAS Americas to the lawsuit comes after an investigation by REDD Intelligence and the Latin American Herald Tribune exposed the secret Russian transaction late last month.

A 49.9% stake in the three refineries and the extensive U.S. pipelines owned by Citgo was “used to raise new financing”,PDVSA admitted in a defensive statement after the potential Russian ownership of strategic oil and pipeline assets in the United States made front page headlines around the world.

LAHT has the Crystallex v PDVSA – USDC Del – Amended Originating Complaint Including Rosneft & GLAS – 4 Jan 2017 document.

Read the full article here, and don’t miss the part regarding possible action from the Committee on Foreign Investment in the United States (CFIUS).

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Venezuela Admits Mortgaging Citgo in the USA to Russia, Goes on Attack

Following up on the story that PDVSA mortgaged to Russia refineries located in the U.S.,


Venezuela Admits Mortgaging Citgo in the USA to Russia, Goes on Attack

After an investigation by Redd Intelligence and the Latin American Herald Tribune uncovered that Venezuela has mortgaged Citgo to Russia’s Rosneft, PDVSA came out swinging, defensively confirming the story and along with Venezuela’s ruling regime, launching an attack on LAHT, REDD and Russ Dallen.

PDVSA’s statement (emphasis added)

did not reveal what they received in exchange for the shares — nor why it was kept secret — but it is believed that Rosneft lent the Venezuelan state oil company $1.5 billion with the above mentioned stake in the Citgo refineries as collateral.

“Citgo is still owned by PDVSA”, PDVSA’s statement begins by saying, but later in the text PDVSA also admits that “in October it used as guarantee a 50.1% of Citgo in a bond swap operation.” If PDVSA defaults, Rosneft and bondholders could end up owning the refineries.

In short, the assets accumulated by previous Venezuela governments over 40 years were liquidated by “chavismo” in less than 10 years and with the proceeds disposed of in a manner not at all transparent.

The article also describes Russia’s expanding energy foothold.

Read the full report.

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Today’s Capt. Louis Renault moment brought to you courtesy of Maduro’s nephews

As you already know, Efraín Campos Flores and Francisco Flores de Freitas are in real trouble, after being indicted on drug trafficking conspiracy charges, and held without bail.

They have now hired attorneys Rebekah J. Poston and John Reilly, both partners at Squire Patton Boggs LLP.

Why is this a Capt. Louis Renault moment?

Last year Venezuela’s government-owned PDVSA’s subsidiary CITGO paid Squire Patton Boggs over $1.7 million for lobbying to Congress on its behalf.

“I am shocked, shocked!” that the Floreses would hire them.

I’d actually be shocked if the money did not come from PDVSA in some form or another.

[If the law firm’s name sounds familiar, Patton Boggs was involved in the Chevron/Ecuador case prior to its merger with Squires Sanders.]

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CITGO’s Santa’s coming to New Jersey!

To spread good cheer, and propaganda, too:

I just got this in the mail,

2011-2012 CITGO-Venezuela Heating Oil Program to Launch its 7th Edition in Camden, N.J.

CAMDEN, N.J. – Dec. 9, 2011 – The 7th edition of the CITGO-Venezuela Heating Oil Program, which benefits more than 500,000 people on average every winter, will launch its 2011-2012 campaign with a heating oil delivery at the house of a recipient in Camden, N.J. on Dec. 13. Following the home delivery, Joseph Kennedy of Citizens Energy and Alejandro Granado of CITGO will join Camden Mayor Dana Redd and other special guests to speak with senior citizens, students, members of Native American tribes and others about the Program.

Who: Alejandro Granado, President and CEO, CITGO Petroleum Corporation
Joseph P. Kennedy II, President, Citizens Energy Corporation
Dana Redd, Mayor, Camden, N.J.
Arlene Greer, heating oil recipient

What: Launch of seventh annual CITGO-Venezuela Heating Oil Program

Of course Joe Kennedy’s doing this out of the goodness of his heart.

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How about, Sayonara, Citgo?

After nationalizing the Helmerich and Payne oil rigs, Venezuela Defends Plans To Nationalize Helmerich’s Idled Rigs

Venezuela, facing criticism over its plan to nationalize 11 idled rigs owned by Helmerich & Payne Inc. (HP), said Friday the Tulsa-based company was the only one of 33 oil services companies that refused to renegotiate rates starting in early 2009, when oil prices were falling.

“Despite meetings with representatives and directors of H&P for nearly a year, it wasn’t possible to reach an agreement due to the inflexible position of the said company,” according to a statement from state oil firm Petroleos de Venezuela, or PDVSA.

Of the 32 companies that PDVSA successfully renegotiated terms with, 14 of them were local firms and 18 were foreign, PDVSA said.

Venezuela’s government, led by socialist President Hugo Chavez, this week announced plans take over the Helmerich rigs, and said that as soon as it does it will start using them to pump oil.

The rigs in question have been sidelined for more than a year. Helmerich turned them off because PDVSA owes it some $43 million for work the Oklahoma firm already performed. Helmerich says it wants to be paid first before turning them back on because it doesn’t aim to work for free.

Helmerich is also awaiting resolution of currency exchange issues with PDVSA, some which are related to the country’s January devaluation of the bolivar.

The U.S. State Department entered the fray Thursday, calling on Venezuela’s government to compensate U.S.-based drilling companies if it decides to nationalize rigs owned by them.

“We would just call on them to–if they did make such a move–to compensate the owners of those wells,” said State Department spokesman Mark Toner during a press briefing.

Of course, the PDVSA statement blamed “the empire::

“PDVSA categorically rejects the statements made by spokespeople of the U.S. empire,” PDVSA said. “It is trying once again to complicate relations with our partners.”

In this case, should “the empire” strike back? Gustavo Coronel explains the case for ending business with CITGO:

PDVSA has moved to expropriate eleven drilling rigs from this company in Venezuela, following a strategy that I consider suicidal. The strategy is as follows: when PDVSA owes contractors money that cannot pay, or does not wish to pay for whatever reason, then it simply expropriates the assets of the company, in order to delay payment indefinitely. This has been the case with companies expropriated in the past and seems to be the case with H&P.

But that was then and this is now. The move by PDVSA finds Venezuela in a weak position vis- a- vis the United States. Venezuela is no longer as important a supplier of oil to the United States as it was only ten years ago. Currently Venezuelan imports into the United States are barely at the million barrels per day level, a drop of some 300,000 barrels per day since Chavez came into power. More significant is the fact that gasoline exports from Venezuela to the U.S. have practically disappeared. The 2009 report on Petroleos de Venezuela shows that during last year it only exported some 99,000 barrels of gasoline per day. Even assuming that all of these barrels went to the United States, this would represent a drop of some 75 percent as compared to only a few years ago.

In fact, the volumes of Venezuelan oil coming into the U.S. could rather easily be replaced by modest increases of imports from the other top 15 suppliers of oil to this country, mostly from Canada, Saudi Arabia, Angola and Russia. This could be done at minimal disruption of the U.S. market, if Venezuelan aggressive actions against U.S. company assets continue or if Venezuela is designed as a new member of the group of rogue states that support international terrorism.

Of course, that would assume that the Obama administration has grown a pair.

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