Venezuela Mulls Suing JP Morgan over De Facto Economic Blockade

The U.S. investment bank claimed that Venezuela's state oil company missed debt payments. The country hasn't missed payments since 2002.

Venezuela may take legal action against U.S. investment bank J.P. Morgan Chase & Co. after the financial institution accused the South American country’s state oil corporation of being behind in bond payments — an allegation the company denies.

President Nicolas Maduro has slammed such maneuvers as a de facto financial blockade against the country. He directed the state oil company PDVSA to study the possibility of suing J.P. Morgan over the incident.

The investment bank accused PDVSA Monday of missing bond payments amounting to US$404 million on coupons maturing in 2021, 2024 and 2035. The company maintains that it is exercising its right to a 30-year grace period for one of the payments, but that allegations of the other missed payments were incorrect.

The company claimed in a statement that it met its debt obligations “punctually” this month on 2021, 2024 and 2026 bond payments. Mining minister and PDVSA President Eulogio Del Pino took to his Twitter account to blast the spread of “false information.”

J.P. Morgan reportedly pointed to information from PDVSA paying agent Citigroup and Clearstream to alleged missed payment. The state oil company advised bond holders in a statement to request information from the financial institutions where they purchased the securities, suggesting the paying agent may have created a backlog. Critics suggest that the move spooks markets without justification.

President Nicolas Maduro weighed in on the issue Tuesday during a radio program he hosts twice a week. “J.P. Morgan’s attitude is of a criminal nature,” he said. “The least JPMorgan can do is apologize to the Venezuelan people.”

The debacle comes after the U.S. financial services corporation Citibank, a division of Citigroup, allegedly threatened to close the Venezuelan government’s foreign currency accounts within 30 days back in July. Maduro accused the bank of attempting to set up a “financial blockade” against the country.

PDVSA President Pino told teleSUR that J.P. Morgan’s accusations are part of a campaign by international credit rating agencies and right-wing forces by destabilizing PDVSA and Venezuela. Energy analyst David Paravisini told teleSUR that the incident represented a failed attempt to force PDVSA into default.

The accusations, which Pino has claimed stem from a delay in payments by banking agency even though they have the funds, come despite liquidity to fulfill debt responsibilities. According to a report by the Wall Street Journal, Venezuela hasn’t missed a single debt payment since 2002.

In that context, what the Venezuelan government has called an “economic war” on the country parallels the financial destabilization targeting the socialist government of President Salvador Allende in Chile in the early 1970s ahead of the CIA-backed military coup that ousted him from office in 1973. The U.S.-backed economic warfare sought to weaken Chile by “making the economy scream,” as then-President Richard Nixon put it in orders to the CIA, in order to topple the Allende government.

Citigroups is only staying on as PDVSA’s paying agent until the company finds a new one, according to a letter the financial institution sent to bondholders earlier this year.