The Vultures Are Circling -- February 27, 2018

On my drive up to Lewisville this evening to take our oldest granddaughter to water polo practice I was thinking about vultures. We have a lot of vultures of one sort or another in Texas. Especially in the summer. Years ago when running to keep in shape to meet USAF standards, I often saw dozens of vultures roosting on those high-voltage transmission towers.

But I wasn't thinking about Texas vultures tonight. I was thinking about the vultures circling Venezuela. Over on Twitter there has been more and more chatter in the last couple of days regarding Citgo failing and Russia (Rosneft, specifically) getting ready to pounce. Then, earlier today a tweet suggesting that the US was ready to intervene to keep Russia from getting a toehold inside Venezuela. The tweet suggested that China wouldn't let Russia or the US get the booty without a fight.

So, early this afternoon, tweets suggesting that the US, Russia, and China were getting ready to go head-to-head/toe-to-toe on Venezuela or Citgo or some piece of either or both. It's complicated.

Now, tonight, on twitter again, this story from The [London] Financial Times: Swiss trader seeks go-ahead to buy Venezuea-Russia oil loan.

I said it was complicated.

Washington approval of the Swiss request could avert Russia (Rosneft) from taking over a stake in Citgo refineries in the US.

First thought: wow, I'm glad we have adult leadership in the White House, starting with the President. Can you imagine President Obama: "I can guarantee you that Russia won't get Citgo. I keep my word. I bring a gun to a knife fight. I said you could keep your insurance plan. I said you could keep your doctor. I absolutely, positively guaranteed that the Russians were not meddling in our presidential elections. So, tonight, I can, again, absolutely, positively guarantee you that the Russians won't own a refinery in the US."

So, back to the story:

Commodity trader Mercuria has asked the US Treasury for permission to buy out a $1.5bn loan between Russia’s Rosneft and Venezuela’s state oil company, which had raised the prospect of Moscow taking control of refineries on US soil. 

The cash-strapped Venezuela state oil company PDVSA, which has borrowed more than $6bn from Kremlin-controlled Rosneft, caused consternation in Washington last year after putting up a stake in its US-based refining subsidiary, Citgo, as collateral against a portion of the loan. 

The move by Switzerland-based Mercuria would see the trader put up the money to buy out the $1.5bn loan tied to Citgo, before syndicating it to other investors, according to people familiar with the proposal. 

If approved by the US Office of Foreign Assets Control, the deal could avoid a potential diplomatic tangle in the event that PDVSA defaults on its loans, with the US seen as unlikely to approve Rosneft taking over the 49.9 per cent stake in Citgo’s plants. Both Russia and Venezuela are subject to US sanctions, with Rosneft and PDVSA executives singled out for attention from the Treasury. 

Mercuria, which has a deal to supply Citgo’s three US-based refineries with non-Venezuelan crude oil, is attempting to structure the deal so as not to breach US restrictions on providing new finance to Rosneft.  

There is so much more at the linked article.

This is complicated.

And it's going to get more complicated.

We haven't heard from the Chinese yet.

And again, this is a $1.5 billion deal -- and that's just a start. The Venezuelans have at least $6 billion in loans from Russia.