Mérida, August 21, 2021 (venezuelanalysis.com) – Venezuelan state oil company PDVSA has exchanged its shares in Dominican Republic’s Refidomsa refinery for some of its bonds.
The Dominican Minister of Finance, José Manuel Vicente, explained that the swap was done in two operations. First, PDVSA exchanged its 49 percent participation in Refidomsa for bonds held by PATSA Ltd, a Dominican commercial corporation that is part of the cocoa-exporting Rizek Group and acted as an intermediary.
Following the swap, the Dominican government bought the Refidomsa shares from PATSA “for the same agreed price,” a reported US $88.1 million, to own the enterprise entirely.
The agreed compensation fell well short of the $135 million PDVSA paid in 2010, under former President Hugo Chávez’s government. The 49 percent stake had been acquired as part of the Chávez-led regional integration program PetroCaribe, which provided crude at preferential prices to Caribbean countries to boost development. As part of the agreement with Refidomsa, Venezuela would process its heavy crude in the Dominican 34,000 barrel per day (bpd) refinery. The partnership ended in 2015 after a global oil price drop forced Venezuela to wind down its project.
Santo Domingo likewise clarified that it had sought permission from the US Treasury Department’s Office of Foreign Assets Control (OFAC) to ensure that the deal did not violate the sanctions program imposed against Venezuela. The Washington-based office issued a certificate of "no objection."
According to a Dominican outlet, the Caribbean government had its sights on regaining full control of Refidomsa for a couple years after US sanctions against PDVSA affected the company’s production. The refinery has allegedly experienced difficulties making international transactions and attracting foreign investment.
For his part, Venezuelan Oil Minister Tareck El Aissami confirmed the “successful” trade-off in a statement published on Twitter. “As a result of this transaction, Venezuela and PDVSA were able to reduce their public debt, and the Dominican state became Refidomsa's sole owner,” reads the document.
El Aissami explained that giving up PDVSA's stake in the Dominican refinery in exchange for some of its bonds responded to Washington's sanctions blocking the Venezuelan state and PDVSA from honoring their "financial commitments with their creditors."
“This transaction demonstrates Venezuela and PDVSA’s firm commitment to comply with their contractual obligations, despite the criminal external restrictions,” as well as the nation’s disposition to negotiate with creditors and restructure its debt, the oil minister added in the statement.
A raft of unilateral measures from Washington in recent years, including financial sanctions and an oil embargo, crippled Venezuelan oil production while also stopping Caracas from servicing its debt. As a consequence, state- and PDVSA-issued bonds defaulted. The Refidomsa deal eases the South American country’s debt burden after attempts to renegotiate with bondholders were likewise scuppered by Washington.
While reports did not specify which debt instrument was reclaimed from PATSA, Caracas had prioritized servicing the PDVSA 2020 bond until the last moment, in part because 51 percent of US-based subsidiary Citgo was pledged as collateral.
The 2020 8.5 percent bond was mired in controversy in 2019 as US-backed opposition led by Juan Guaidó made a $71 million payment to bondholders only to be unable to meet a $913 million payment months later and attempt to declare the debt as “void.”
The US Treasury Department stepped in with successive measures blocking transactions involving the 2020 bond and requiring claimants to file for permission before seizing Venezuelan assets. Canadian mining giant Crystallex and US oil corporation ConocoPhillips are also looking to have Citgo shares auctioned in order to collect on $1.4 and $2 billion respective international arbitration awards to compensate for assets nationalized by the former Hugo Chávez government.
The Venezuelan government had managed to reach a settlement with Crystallex in late 2018 but sanctions meant it could not fulfill its payments as financial institutions refused to operate as intermediaries.
For its part, ConocoPhillips has recently attempted to collect a $115 million debt owed by the Jamaican government to Caracas as part of PetroCaribe agreements as partial compensation, while also filing to seize PDVSA assets held in Portugal’s Novo Banco.
Andreína Chávez Alava reporting from Guayaquil, Ecuador and Ricardo Vaz from Mérida, Venezuela.