EXCLUSIVE-Venezuela's Rodriguez readies Citgo board takeover, sources say

By Marianna Parraga and Deisy Buitrago

HOUSTON/CARACAS, April 1 (Reuters) - Venezuelan interim President Delcy Rodriguez's administration is getting ready to take over the boards of state oil firm PDVSA's U.S. subsidiaries, including Citgo Petroleum, four sources close to the preparations said.

The move could aggravate a tug of war for the control of the seventh-largest U.S. refiner.

Washington in March recognized Rodriguez as Venezuela's leader following the capture of President Nicolas Maduro, opening the door for her government to reopen embassies and consulates in the U.S. and regain control of Venezuela-owned companies abroad that Maduro had lost to the opposition.

Citgo, the crown jewel of Venezuela's foreign assets, has been run since 2019 by supervising boards appointed by an opposition-led congress that is no longer active.

Rodriguez has yet to complete her board member lists for the Treasury to give them individual clearance, after some names that were suggested were not well received in Washington, two of the sources said. If the executives are approved, the Treasury's Office of Foreign Assets Control (OFAC) would have to issue a specific license, the sources said.

"Treasury officials have already gotten in contact with members of Citgo's board to tell them new board members to be appointed by Rodriguez are expected to be authorized, provided they are cleared by Washington," one of the sources said.

The U.S. State Department also must be in line with the appointments and provide policy guidance to OFAC, another source said.

On Wednesday, the U.S. Treasury removed Rodriguez from its sanctions list, which could facilitate her administration's takeover of assets in the U.S.

Rodriguez's envoys have also told some of the law firms that have represented Venezuela, PDVSA and its subsidiaries in U.S. courts in recent years that their contracts are in review and could be suspended, according to the sources.

Venezuela's ministries of oil and communications, PDVSA, Citgo and the U.S. Treasury and State departments did not reply to requests for comment. Boards supervising Citgo declined to comment.

CHANGES IN SLOW MOTION

PDVSA's board in March ratified Asdrubal Chavez - a cousin of late Venezuelan President Hugo Chavez - as head of all its U.S. subsidiaries. But Chavez, who had previously been denied a U.S. visa to lead Citgo from Houston, has not effectively run the companies in more than seven years.

As part of the March appointments, PDVSA also added to the boards Nelson Ferrer, Alejandro Escarra and Ricardo Gomez, executives close to Rodriguez who in some cases previously worked in Citgo under Chavez.

It was not immediately clear if those executives would be authorized by the Treasury.

The shakeup could arrive as the Houston-based refiner continues to fight in U.S. courts to overturn the sale of its parent, PDV Holding, to an affiliate of hedge fund Elliott Investment Management.

Citgo has said in court that the auction, ordered to pay billions of dollars to creditors for debt defaults and expropriations in Venezuela was unfair, plagued by conflicts of interest and reduced the value of the assets. A court officer overseeing the process has denied any wrongdoing.

The complex auction was completed last year after a Delaware judge approved a $5.9 billion bid by Elliott's affiliate Amber Energy. But the final transfer of ownership is now pending a green light from the U.S. Treasury, which has protected Citgo from creditors since it severed ties with Caracas-headquartered PDVSA in 2019 amid U.S. sanctions.

Elliott declined to comment. Amber did not immediately reply to a request for comment.

Rodriguez's opinion on Elliott's possible takeover was unclear. Previously, she criticized the auction and said it constituted the "theft" of a sovereign asset.

ADDED COMPLICATIONS

Rodriguez's allies could further complicate the already complex administration of Citgo's refining network, which is considered strategic for U.S. energy security.

The refiner was investigated through 2018 by the U.S. Department of Justice, leading to the indictment of several former employees for alleged bribery and other forms of corruption.

The source said the memory of the arrest by Maduro's government of six top Citgo executives between 2017 and 2022 and several oil ministers still in state custody in Venezuela is spreading fear of retaliation among other executives, who could resign to avoid any confrontations with Rodriguez.

Citgo's current board, led by Carlos Jorda, turned around the then highly indebted company by paying off debt, recovering core operations and expanding refining capacity. This year, with U.S. approval, it resumed purchases of Venezuelan oil after seven years.