Business & Tech

PDVSA appeals US ruling allowing Canadian firm to seize Citgo shares

Venezuela's state oil company PDVSA on Friday appealed a US court ruling that would allow a Canadian mining company to seize shares of PDVSA's US-subsidiary Citgo in payment of a $1.2 billion debt.

Losing Citgo would dry up one of Venezuela's last remaining sources of foreign revenue
Losing Citgo would dry up one of Venezuela's last remaining sources of foreign revenue (GETTY IMAGES NORTH AMERICA/AFP)

Venezuela's state oil company PDVSA on Friday appealed a US court ruling that would allow a Canadian mining company to seize shares of PDVSA's US-subsidiary Citgo in payment of a $1.2 billion debt.

The case dates from 2011, when the Venezuelan government seized a mine Crystallex had been awarded and despite a settlement through an arbitration panel Caracas failed to repay the company.

US District Court Judge Leonard Stark ruled Thursday the mining firm could seize Citgo shares from PDVSA, although the order will not be issued until final details are worked out.

He rejected PDVSA's argument that it is separate from the government in Caracas and should not be held liable, favoring the assertion that the company is an "alter ego" of the government.

It is another blow to the embattled government of President Nicolas Maduro, who has overseen the collapse of the nation's once-thriving oil-based economy, which is now in default.

Thousands of Venezuelans flee the country daily, malnutrition is rife and the International Monetary Fund said inflation could reach one million percent this year.

PDVSA, once the jewel in the crown of the nation's economy, has been hamstrung by debt and lack of investment that has shrunk output.

Losing Citgo would dry up one of the last remaining sources of foreign revenue. And even that is already at risk since a nearly 50 percent stake in Citgo was used as collateral for a $1.5 billion loan from Russia's Rosneft.

PVDSA's bonds represent 30 percent of Venezuela's external debt -- estimated to be around $150 billion.