American pledge of "Rosneft" for loans to Venezuela was arrested

The American court arrested a foreign asset of the Venezuelan state company PDVSA - Citgo at the suit of the Canadian company Crystallex. 49.9% of its shares were pledged by Rosneft for its loans of almost $ 6 billion.
Canadian gold mining company Crystallex in the US court has arrested a key foreign asset of the Venezuelan oil company PdVSA - American Citgo, 49.9% of which is pledged to Rosneft. Canadians demand Venezuela to return $ 1.4 billion for the nationalization of its assets. But PdVSA can try to convince the court that it should not be responsible for the actions of the Venezuelan government.

Canadian Crystallex in the Delaware court has secured the seizure of American assets of the Venezuelan state-owned company PdVSA - a petroleum refinery Citgo. The defendant in the suit was the structure of PdVSA - PDV Holding, which owns 100% of Citgo's shares (its largest asset is a refinery with processing of about 750,000 barrels per day). PdVSA filed an appeal, AFP noted, it has not yet been announced that it has been accepted for production. Crystallex requires Venezuelan oil company $ 1.4 billion in compensation for losses for the nationalization of its gold-mining assets in the country in 2011. Since 2017, Crystallex has insisted on the seizure of PdVSA assets as security measures.

The reason for the claim of the Canadian company was the fear that 49.9% of Citgo's shares will go to Rosneft: its structure Rosneft Trading received in 2016 this share in the collateral for a loan to Venezuela for $ 1.5 billion. Crystallex called the deal "fraudulent transfer of assets" . The lawyers interviewed by Kommersant found it difficult to guess what would happen to Rosneft's security rights with this or that development of the process (it is not clear that it was the court that arrested Citgo's shares or assets).

At the same time, it was informally reported that Rosneft wanted to get rid of security rights. In July 2017 Reuters wrote that Rosneft could exchange a pledge of Citgo for shares in deposits in Venezuela, later the Financial Times reported that the US Treasury was considering the application of the Swiss trader Mercuria to buy out PdVSA debt to Rosneft, but about any progress transactions are unknown. Head of the Russian state-owned company Igor Sechin in late 2017 made it clear that Rosneft could give this pledge. "It would be foolish to assume that we need this asset when we are in a state of sanctions," he said. According to him, the company simply provides its financial cooperation at the expense of collateral. In Rosneft, the situation is not commented.

"Rosneft" - one of the largest foreign donors of the Venezuelan economy, which is on the verge of default. Of all the Russian oil companies, only it has not left the country, it owns shares in several fields. In addition, Rosneft helped PdVSA prepay for the supply of oil and oil products, a year ago the debt reached $ 6 billion (last year the Russian company announced the suspension of prepayments). As Rosneft noted in the IFRS report for the second quarter of 2018, Venezuela's debt to Rosneft was $ 3.6 billion.

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"The practice of seizing the defendant's property is quite common, American courts are more willing to resort to such measures than the Russian ones," says Dmitry Lubomudrov, partner of the law firm Andrei Gorodissky and Partners. "In this situation, we are talking about the imposition of arrest, that, according to the plaintiff, PdVSA operations were aimed at fraudulent withdrawal of funds, due to which the claims of the plaintiff could be satisfied. " The position of PdVSA boils down to the fact that formally the debtor is not it, but Venezuela, the lawyer explains. According to him, most likely, the same arguments PdVSA will lead in favor of lifting the arrest: that the assets are actually not a debtor, but an independent legal entity, not obliged to answer for the state's debts. "The chances of lifting the arrest depend on whether the American court agrees with these arguments, or recognizes that the asset is actually Venezuela's property and that the arrest is lawful," believes Mr. Lubomudrov, recalling the arrest of property of state companies for the debts of the state, for example, claims of YUKOS shareholders against Russia.