(Bloomberg) -- The U.S. wants a judge to block a Canadian mining company’s sale of shares of refiner Citgo Petroleum Corp.’s parent, which is owned by the country of Venezuela.
Justice Department lawyers Wednesday asked U.S. District Judge Leonard Stark in Delaware, where Citgo’s parent is incorporated, not to bless Crystallex International Corp.’s request to sell the shares until U.S. regulators finish examining the deal. Crystallex is seeking to enforce a $1.4 billion arbitration award against Venezuela, most of which remains unpaid.
The U.S. move backs arguments by lawyers for Venezuelan opposition leader Juan Guaido, who is recognized by more than 50 nations as the country’s legitimate leader after strongman Nicolas Maduro was accused of rigging his 2018 re-election. Guaido is opposing the sale of Citgo’s assets to protect one of the country’s main sources of hard currency.“This court should not authorize Crystallex to take further steps toward a forced sale” of the parent’s shares “in light of the risk that such steps would harm U.S. foreign policy and national-security interests in Venezuela,” U.S. lawyers said in a court filing.
Carlos Vecchio, Guaido’s ambassador to the U.S., said the opposition government is “not refusing to recognize these debts, but we want to do it in an orderly manner.”
A spokesman for the presidency didn’t immediately return calls for comment. Maduro’s plan, before losing control of Citgo, was to pay Crystallex with money from the oil revenue.
Toronto-based Crystallex targeted the shares in compensation for the loss of the Las Cristinas gold reserve after the late president Hugo Chavez nationalized the second-largest gold mine in Latin America. After taking over the asset, Chavez assigned it to Petroleos de Venezuela SA, the country’s state-run oil company.
The bankrupt miner won the $1.2 billion arbitration award in 2016 over the loss of the gold mine. That award has since grown to $1.4 billion with interest.
U.S. officials including Elliott Abrams, President Donald Trump’s special representative to Venezuela, contend Crystallex can’t sell the shares without a license from the U.S. Office of Foreign Asset Control, a unit of the U.S. Treasury that oversees sanctions. Crystallex will need OFAC to grant a waiver to allow it to move forward with the sale of PDVSA’s shares, the U.S. says.
In 2018, Stark cleared the way for Crystallex to move on the shares of Citgo’s parent and a U.S. appeals court backed the judge’s decision. Guaido’s lawyers are still challenging Stark’s 2018 finding that Venezuela is the “alter ego” for PDVSA’s debts, which puts Citgo’s assets at risks.
The case is Crystallex International Corp. v. Bolivarian Republic of Venezuela, 17-MC-00151, U.S. District Court, District of Delaware (Wilmington).
(Updates with background)
For more articles like this, please visit us at bloomberg.com
Subscribe now to stay ahead with the most trusted business news source.
©2020 Bloomberg L.P.