That Venezuela is a nation in danger of going bankrupt is not news. The country has been headed that way for some time.

What is news is that Venezuela’s national oil company, Petróleos de Venezuela (PdVSA), put a lien on nearly 50% of its U.S.-based Citgo subsidiary for a $1.5 billion loan from Russia’s state-controlled oil company Rosneft. If, as could happen at nearly any time, Venezuela should default on interest payments on its sovereign debt, the default could lead to Russian ownership of the second-largest foreign owner of U.S.-based oil refining capacity.

That prospect raised enough concern with two U.S. Congress members that they wrote to Treasury Secretary Steven Mnuchin urging him to initiate a review of the asset transfer by the Committee on Foreign Investment in the United States (CFIUS).

The two, Jeff Duncan (R-SC) and Albio Sires (D-NJ), wrote:

This situation, if left unchecked, could severely undermine U.S. national security and energy independence…. Through Citgo, the Venezuelan government owns three U.S. refineries, … and a large network of pipelines.

Venezuela is indebted to Russia and China for billions of dollars in loans, but given the dire economic situation, it is doubtful that Caracas will be able to continue honoring those debts long-term. The Russians have a lot to gain through the PDVSA-Rosneft-Citgo asset transfer to the detriment of U.S. interests, and we remain deeply concerned over the implications for U.S. national security.

Rosneft and its CEO, Igor Sechin, are under U.S. sanctions that could prevent a legal takeover of U.S. assets, even if Venezuela defaults. What would happen if and when the sanctions are lifted is less clear.

The Wall Street Journal reported that 50.1% of Citgo was pledged as collateral to bondholders who agree to a debt-swap deal last October. The paper also cited Michael Roche of Seaport Global Holdings who thinks “it is likely that the Russian company has already acquired the approximately $6.7 million of bonds that might gain control of Citgo if PdVsa were to default on both its loan and bond obligations.”

A report from Reuters last Friday noted that Venezuela had begun making bank transfers last week to meet its nearly $3 billion in coupon payments due Wednesday, April 12.

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