Sanctions on Venezuela Exempt Citgo -- U.S. Energy Portfolio at Risk

Amongst the lingering aftermath of Charlottesville, pardon of an Arizona sheriff as Hurricane Harvey slammed into Texas and punting of tax reform to Congress, President Trump recently levied more sanctions against Venezuela.

Supporters and critics of the president will long debate whether these sanctions will make a difference. After all, Venezuela has become a cesspit of human rights abuses. The harassment and oppression of opponents of the late Hugo Chavez and now his successor, Nicolas Maduro, have long been brutal. The country has also become an economic basket case, as the headlines over shortages of toilet paper showcase just one symptom of the country’s financial collapse. Ongoing social and economic upheaval have together driven hundreds of thousands of Venezuelans, including many LGBT citizens, to seek new lives and even asylum in countries such as Chile, Uruguay and Spain. The crisis has even led more Venezuelans to petition for asylum in Spain than Syrians.

But there is a caveat to the White House executive order that launched more sanctions against this country of 30 million people: Citgo Petroleum Corporation, which the Venezuelan national oil company Petróleos de Venezuela (PDVSA) owns, is exempt from the sanctions announced last week.

According to the White House’s press office, exempting Citgo from this updated list of sanctions is necessary to “mitigate harm to the American and Venezuelan people.” In addition to leaving Citgo’s transactions alone, the sanctions also exempt humanitarian assistance and financial dealings related to existing Venezuelan debts – and “financing for most commercial trade, including the export and import of petroleum.”

Citgo has long been a political football between the American and Venezuelan governments. During the presidencies of both George W. Bush and Barack Obama, Chavez relished the opportunity to export oil via Citgo to the U.S. at below-market costs, or even for free, so low-income citizens in cold weather regions such as New England could have affordable home heating oil. And also through Citgo, Venezuela offered humanitarian aid for Hurricane Katrina victims in 2005; recently Venezuela said it would contribute up to $5 million in assistance to help with Hurricane Harvey recovery efforts if accepted.

The White House has defended Citgo’s exemption by noting that the $32 billion company will not be allowed to divert any of its profits to its Venezuelan parent. But as has been the case with this White House, there is always more to the story - and this one raises plenty of eyebrows.

According to Timothy Cama and Megan Wilson of The Hill, one of the many lobbying firms Citgo has hired, Avenue Strategies, benefits from close ties to the Trump White House. Co-founded by former Trump advisors Corey Lewandowksi and Barry Bennett, the firm has represented Citgo, which through June has paid at least $80,000 while Bennett reportedly lobbied the White House, the Department of Energy and the Department of Justice - as well as the Treasury Department, which runs the unit that launches and monitors economic sanctions.

Meanwhile, Congressional leaders have expressed concern over evidence that the Russian energy company Rosneft could take control of Citgo's assets. Russia's largest energy company loaned $1.5 billion to PDVSA in December, with the Venezuelan oil firm offering 49.9 percent of its shares in Citgo as collateral. Rosneft has been banned from having any financial transactions with U.S. companies since sanctions were first launched against Russian companies in 2014. ExxonMobil sought a waiver this spring so it could partner with Rosneft on oil drilling projects in the Black Sea, but the Treasury Department denied that request.

Meanwhile, PDVSA's precarious financial situation means that three of Citgo's refineries, as well as several pipelines and fuel terminals, could end up controlled by Rosneft. Instead of draining the swamp, the swamp could become even deeper and murkier as the blurred lines between lobbying and policy making at the White House risk disrupting America's energy portfolio.

Image credit: Mike Mozart/Flickr