Venezuela – No More US Business

Looks like Trump has seen the fraud that was the election in Venezuela and said “Nope.” to doing business there.

https://www.caracaschronicles.com/2018/05/21/breaking-news-donald-trump-signs-new-executive-order-that-prohibits-further-transactions-with-venezuela/

Breaking News: Donald Trump Signs New Executive Order That Prohibits Further Transactions with Venezuela
By
The Caracas Chronicles Team –
May 21, 2018

Donald Trump just signed an Executive Order —effective at 12:30 p.m. EDT on May 21, 2018— that prohibits all transactions by a United States person or within the US, related to, provision of financing for, and other dealings in:

The purchase of any debt owed to the Government of Venezuela, including accounts receivable;
Any debt owed to the Government of Venezuela that is pledged as collateral after the effective date of this order, including accounts receivable; and
The sale, transfer, assignment, or pledging as collateral by the Government of Venezuela of any equity interest in any entity in which the Government of Venezuela has a 50 percent or greater ownership interest.

The order also prohibits any transaction or conspiracy formed for the purpose of evading or avoiding, or attempts to violate any of the prohibitions set forth in this order.

Includes a link to the actual order:

https://www.whitehouse.gov/presidential-actions/executive-order-prohibiting-certain-additional-transactions-respect-venezuela/

Sec. 6. This order is effective at 12:30 p.m. eastern daylight time on May 21, 2018.

DONALD J. TRUMP

THE WHITE HOUSE,
May 21, 2018.

This is going to put a crimp in Citgo (that gets most of their oil from Venezuela) and a lot of 7/11 stores (that often have Citgo gas).

Venezuela will need to hustle to find someone else to buy / refine their oil. US oil prices will likely rise as we buy a lot of their oil and we’ll need to hustle up replacement suppliers.

One must wonder just how long Venezuela can continue down this road to Socialist Workers Paradise before it collapses. Who’s going to support it? How will it end?

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
This entry was posted in Economics - Trading - and Money, Energy, Political Current Events and tagged , , , , . Bookmark the permalink.

12 Responses to Venezuela – No More US Business

  1. E.M.Smith says:

    An interesting story about the capital structure of CITGO and how it is likely to be disposed in a financial crisis. Since that’s likely to happen now, worth the read if you are into the money side:

    https://www.caracaschronicles.com/2018/03/05/everybody-wants-piece-citgo/

    Everybody Wants a Piece of CITGO
    By
    Daniel Urdaneta –
    March 5, 2018

    The Venny bond market is a hell of a mess, from long before Maduro caught the bulls with their pants down. Dig deep beyond the pile of worthless junk issued by the Republic and PDVSA, however, and you might strike gold: bonds backed by CITGO Holding, Inc. are still paid on schedule.

    That’s because if you stop paying, the most valuable resource of the nation held abroad will fall prey to a swarm of vultures that has never stopped growing, pitted against each other for dibs on the only hard asset left in Venezuela, after years of pawning off La Patria.
    Last year we digged deep into the matter. The short version goes like this:

    PDVSA owns CITGO since the early 90s. The company is a critical part of the nation’s oil business, due to its huge refining capacity specialized in extra-heavy crude, used to process almost 800 thousand barrels a day for the United States, Venezuela’s most important trading partner.

    Since the fall of oil prices in 2014 (or a few years before, depending on who you ask), PDVSA has been borrowing money to pay old debts at an unsustainable clip.

    When no buyers of PDVSA bonds were left, chavismo started pawning Citgo assets, through collateralized bond sales, building a house of cards — or rather, a pyramid of cards.
    […]
    What’s certain is that Venezuela will most likely lose CITGO for good, and all it got in return was an extra couple years of Maduro in power.

    Talk about shitty deals.

  2. ossqss says:

    The US is an exporter now. Perhaps we keep it in house to compensate.

  3. “Venezuela will need to hustle to find someone else to buy / refine their oil.”

    In practical terms there really is no someone else to buy/refine Venezuelan oil. At least not at the scale or with the practicality that Citgos refineries in the US have.

    The refinery in Curazao that also handled Venny crude just had all the oil on hand confiscated by Conoco Phillips. Any other Ven oil that goes there will suffer the same fate until ConocoPhillips gets the 2BIL$ it’s owed.

    China and India do receive Venny crude, but the China shipments are paying off debt and India is just this side of BFE.

    Coupled with the Iranian nuclear deal collapsing and the return of sanctions that make it harder for Iranian crude to be sold and you’re looking at higher crude prices in the medium and long term. Place your bets accordingly.

  4. philjourdan says:

    It is not only “Trump”. All the Americas are now boycotting Venezuela. We are the scapegoat for the action, but any half way intelligent person (which leaves out most on the left) knows that the OAS has not danced to Americas tune in many years.

  5. E.M.Smith says:

    @PhilJourdan:

    It’s a real problem. At what point is it OK for foreign countries to upend a sovereign country’s political processes? When is it OK to go kick down your neighbor’s door and tell them they are treating their kids wrong? Same basic issues.

    I don’t have an answer. I suspect it will require evidence of a real domestic revolution to justify intervention.

    @Robert Nasser:

    Good points. While lots more refineries have added equipment for handling heavy oil, they are already booked handling some other heavy oil source. Valero can handle heavy crude, but being US based are also “off the table”. So Venezuela will have a shortage of refineries it can access that can handle their very heavy crude, and Citgo and Valero may be scrambling to find crude…

    BFE? Big … Explosion? Bum … Egypt?

    I do have to say that I wonder to what extent the various wars and destruction of oil facilities in Libya, Iraq, and the isolation / ‘sanctions’ against other oil providers like Iran & Venezuela just might be a coordinated effort to reduce global oil supplies and raise prices. I find it interesting that we never have such “interventions” in places like Zimbabwe or Sudan… No oil, no interest?…

    It would be interesting to have an input / output graph showing where heavy crude comes from, refineries it goes too, and what other facilities can handle it but are not at present. Somebody has to be doing that right now ( C.I.A. & Venezuela at a minimum) and it would be useful to see what they are seeing and predict their conclusions. Most “regular folks” tend to think all oil is fungible and don’t realize different crude stocks can only be processed in particular facilities and that it can take years to convert a refinery to different stocks. (Add cat crackers and hydrotreaters)

  6. gallopingcamel says:

    How will it end in Venezuela? Recent history should inform us.
    Chavez and his gang were replaced by something worse.
    Likewise, Maduro and his gang will be replaced by something worse even though that is hard to imagine.

  7. E.M.Smith says:

    @G.C:

    Perhaps Colombia could just annex it as a “protectorate”… Folks down there are prone to a more flexible idea of borders than we are…

    Or maybe Saudi Arabia could just buy it ;-)

    It would be interesting for Colombia to just start a new city of Nuevo Venezuela just over the border with open access to all Venezuelans. Eventually the rump Venezela would consist of only regime members and fully collapse, but without destroying the people who could then go home…

  8. philjourdan says:

    I don’t have an answer. I suspect it will require evidence of a real domestic revolution to justify intervention.

    I do not see a need for the US to do anything. Columbia is getting very Pissed at the whole situation (they have their own illegal immigrant problem – Venezuelans). They can easily get assistance from a few other SA countries to take out what is left of the Army (already disgruntled earning $2/month).

    The OAS wants to be a serious organization. When Venezuela gets to that point, I think they can handle it.

  9. E.M.Smith says:

    @Phil:

    Just to be clear; I was seeing “intervention” as coming from their “neighbors”, not the USA.

    Only thing a US presence there could do is make things worse. It needs a “fellow socialist” consortium of countries, who are tired of the embarrassment, to fix it. That way it can’t trigger the “counter revolutionary” meme of socialism… (i.e. not overthrowing “the revolution” but replacing a corrupt comrade…)

  10. philjourdan says:

    @E.M. – Agreed. I erroneously assumed that you were referring to Uncle Sam. My daughter recently went back there and was castigated by some when they learned she had married a “gringo”. Maduro may not be popular, but at the current time, the US is not much above him.

  11. E.M.Smith says:

    Well, I looked at what I wrote and it was NOT clear who I was thinking ought to “intervene” and it is usually the adventuresome USA who does it (despite my wishes and it being generally a bad thing to do..>) so I figured I needed to clarify it, ’cause it wasn’t clear…

    Personally, I’d love it if the USA “Foreign bribe Aide” money was set to zero and our troops were removed back to the USA (along with all the $$$ they spend).

    Somebody in some other two countries want to mix it up, we ought to get a text with the best channel to watch the show. Somebody in some other country wants to attack us? Well, we can make places “glow in the dark” without leaving home…

    Basically, I’m a “Lifeboat USA” person not a One World Government person.

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