U.S. denies Crystallex request for Citgo shares, will reassess in 2022

September 15, 2021

(Reuters) -The U.S. Treasury Department on Wednesday denied a request by Canadian gold miner Crystallex to receive shares in Venezuelan-owned U.S. refiner Citgo Petroleum Corp as partial payment for debt, according to a document seen by Reuters.

Treasury’s Office of Foreign Assets Control (OFAC) told Crystallex the State Department had determined such a sale would be inconsistent with U.S. foreign policy interests, but that Washington would reassess these considerations during the first half of 2022.

Citgo has been controlled by Venezuelan opposition leader Juan Guaido since 2019, when Washington recognized him as the South American country’s leader and sanctioned state oil company PDVSA – Citgo’s ultimate parent – in a bid to oust President Nicolas Maduro, who it accused of election-rigging.

A judge approved the sale of shares in Citgo’s immediate parent earlier this year to satisfy Crystallex’s $1.4 billion judgment for the expropriation of its assets in Venezuela.

But the U.S. sanctions meant the company needed a specific license from OFAC, which enforces them, for the sale to take place.

“Given that OFAC’s action was taken ‘without prejudice,’ and consistent with the suggestion in the letter, we will ask the USG to reassess our license application during the first half of 2022,” Crystallex Executive Chairman & CEO Robert Fung told Reuters in a statement.

The statement noted that OFAC’s letter postpones any final decision on the license application and said that they “anticipate a favorable decision.”

Maduro remains in power despite the sanctions and diplomatic pressure, backed by the OPEC nation’s military and allies such as Russia and China. Washington has expressed concern that any loss in control of Citgo could have negative political repercussions for Guaido.

In its denial letter to Crystallex, however, OFAC noted that the mandate of the opposition-held National Assembly elected in 2015, over which Guaido presides, ends in January 2022.

“The United States will reassess whether the sale of the PDVH shares is consistent with United States foreign policy, as the situation in Venezuela evolves,” the letter read, referring to Citgo’s immediate parent, PDV Holding.

“The United States anticipates doing so during the first half of 2022 as warranted by changed circumstances.”

(Reporting by Luc Cohen in New YorkEditing by Bill Berkrot and Sonya Hepinstall)