U.S. Warns Russia, Bondholders on Venezuela Debt Negotiations
By
Dimitra DeFotis
Nov. 9, 2017 7:44 p.m. ET
The Venezuelan government wants bondholders to come to Caracas Monday to restructure debt as it scrounges for cash.
But the U.S. government warned late Thursday that if Venezuela's vice president -- named by President
Nicolas Maduro as a debt meeting host last week -- or other sanctioned individuals are at the table with Americans, the tete-a-tete could be a violation of U.S. sanctions.
Venezuela seems to have avoided a default this week after Russia said Wednesday that it would restructure $3 billion in loans to Caracas to free up money for payments that are past due. But if Russia seeks to renegotiate loans tied to Venezuela's Citgo refining subsidiary in the United States, Americans and people in the U.S. can't negotiate without permission from the U.S. Office of Foreign Assets Control. Here's the OFAC
language explaining rules on refinancing bonds issued by the Venezuelan government and state oil company:
"U.S. persons are generally prohibited from engaging in transactions or dealings with persons named on OFAC’s specially-designated nationals (SDN) list, including dealing with an SDN in the context of efforts to restructure Venezuelan and Petroleos de Venezuela, S.A. (PdVSA) debt."
OFAC also reminded bondholders that even if the Venezuelan negotiators aren't on the U.S. sanction list, renegotiating new long-term bonds is forbidden. More OFAC language: "General License 3 does not authorize any transaction by a U.S. person or within the United States that involves the creation or subsequent dealing in new debt of PdVSA or the Government of Venezuela with a maturity of greater than 90 days or 30 days, respectively, absent a license from OFAC."
Over the past three years, Russia has provided Caracas with $10 billion in financial assistance, the New York Times calculates. As collateral on one loan, Russian oil company Rosneft (ROSN.ME) gained a 49.9 percent stake in Citgo, Venezuela's U.S. refining subsidiary. The U.S. government includes subsidiaries in its ban on debt negotiations.
The
U.S. government sanctioned 10 more Venezuelans Thursday who allegedly committed fraud to undermine Oct. 15 state elections.
U.S. Warns Russia, Bondholders on Venezuela Debt Negotiations