Implications of Rising Tensions between the United States and Venezuela
Amid rising political tensions within Venezuela, the US government offered formal recognition of opposition politician Juan Guaidó as the rightful leader of Venezuela. However, President Nicolas Maduro remains in control of the military and has declared he has no intention to step down in the face of rising US pressure. As a result, tensions are escalating both within Venezuela and internationally between the US, Venezuela, and Venezuela’s patrons, China and Russia.
The Trump administration’s support for the Venezuelan opposition could have a significant impact on oil refining in the US. To date, the United States has refrained from issuing crippling sanctions on Venezuelan oil and the Venezuelan oil industry, which is at least partially attributable to the close relationship between the two countries’ oil industries. Venezuelan oil is widely used in diesel production in the US, and refineries along the US Gulf Coast rely on a regular supply of Venezuelan oil to maintain operations. Now that the US government has recognized Juan Guaidó as the rightful leader of Venezuela, the United States could look to seize assets from Maduro’s government, one of the largest of which is Citgo, a Houston-based oil company owned by Venezuela.
Citgo owns refineries in Texas and Louisiana, along with several distribution terminals across the United States. The company sells fuel to Citgo gasoline stations that are locally and independently owned. Late last year, Venezuela struck a $1.4 billion deal to retain control of Citgo Petroleum Corp. and the company’s crude refineries, in the face of aggressive legal action from creditors.
Future developments should be monitored closely, as asset seizures or the collapse of Venezuelan oil exports could have a significant impact on oil prices, especially along the US Gulf Coast.
Keep a lookout for our upcoming reports on how current events in Venezuela could impact the US government’s robust sanctions regime against Venezuela.
For further details on these developments, and to stay on top of the US sanctions regime, please contact Edward Carlson at firstname.lastname@example.org or Jonas Patzwall at email@example.com, or your usual contact at Floyd Zadkovich (US) LLP