Chavez's $8B fuel tab

[ChangoLoa]

Venezuela leader loses long bond debt battle :(

After a six-year legal battle, Venezuela strongman Hugo Chavez finally struck out in federal court this week and must honor an $8 billion bond debt his government ran up -- or face seizure of his 14,000 nationally owned Citgo gas stations in the US.

The flap began when Chavez was sued in 2005 by a group of Ohio investors who claimed he and his government refused to make payment on quarter-century-old bonds, despite certification and guarantees by Venezuela's oil-rich Treasury.

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Instead of paying, Chavez mounted a counter-attack and, working his way through at least five law firms, spent $40 million and tied up the courts for four more years in a bitter -- and ultimately unsuccessful -- appeals fight.

That appeals battle ended this week when a decision handed down by the Sixth Circuit Court of Appeals shut the door on Chavez's appeal. And it was unanimous. All 23 judges in the appeals court gave a thumbs-down to Chavez's effort to move the case up to the US Supreme Court.

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http://www.nypost.com/p/news/business/chavez_fuel_tab_e4ZIy9G4T0giblqInuldZM

[ChangoLoa]

1. This is bad, real bad

And it sounds like the beginning of something.

Without Citgo, who would import Venezuelan oil to the US?

If the US stops buying our oil for 5 months, the Ven State would be completely broke.

[Downwinder]

3. Here is a bit more accurate and less political article.

Venezuela Loses Wiggle Room to Skirt $8B Debt


http://www.courthousenews.com/2010/12/27/32901.htm

[ChangoLoa]

7. The NY Post was pretty aggressive indeed.

[naaman fletcher]

4. You don't need citgo to import oil

in fact, you don't even need an official agreement to sell it to US. Oil is a global market, it will end up where it ends up, which means a huge amount of it here.

[Downwinder]

5. Citgo stations are all franchises.

[ChangoLoa]

6. I believe we do

We don't need an official agreement, we need an importer in the US. We export almost exclusively to CITGO in the US. Around 1 ml.b/day.

Without CITGO, an implicit agreement between the US govt and the majors could lead to an implicit embargo on Venezuelan oil. The majors in the US could stop buying it. In that case, who else would buy it? A good portion of PDVSA's refining capacity is in the US and the oil sector is a pure oligopoly. There are no other significant actors.

The US could use some of its strategic reserves (total: 600-700 ml.b) to asphyxiate Venezuela. But that is certainly an apocalyptic worst case scenario.

The most probable scenario being the one where Venezuela loses 8 bl. $ of its reserves. Look for another devaluation in january.

[naaman fletcher]

8. nah,

all that would happen is the oil would get dumped on the world market and be bought by Glencore or whoever, and end up where it ends up, much in the U.S.

[Downwinder]

9. China was around looking for it last year.

The biggest problem is the high sulfur content. Citgo refineries are adapted to handle high sulfur oil. It will take up to six months or a year to get or be denied a cert to the SCOTUS. The money will keep making money until everything is all settled. Cost of doing business.

[ChangoLoa]

10. And where will they refine that oil?

Oil is not a homogeneous merchandise. Venezuelan oil is heavy and uses a particular process. They need PDVSA's refineries in the US and a distribution network. Parts of this productive sequence could be frozen.

The non-US world market cannot absorb Venezuelan oil because the refining capacity for that kind of oil is completely saturated. PDVSA has projects in India, China and Vietnam, but for the mid term.

[Bacchus39]

2. fascinating n/t

s