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Senators: Russians May Take Control of Houston-based CITGO

A Venezuelan Loan Default Could Give Putin a Stake in Texas Oil Refining.

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Refineries in the Hillcrest neighborhood of Corpus Christi, Texas.
Photograph by AP Photo/Corpus Christi Caller-Times, Rachel Denny Clow

Amid growing tensions between the United States and Russia, Texas’s U.S. senators are worried that a Russian-owned oil company will gain controlling interests in Houston-based CITGO Petroleum and its refinery in Corpus Christi that employs more than 1,000 workers and produces about 4.2 million gallons of gasoline every day. The company also owns tank farms, or terminals, in Corpus Christi, San Antonio, Brownsville, and Victoria.

Senators John Cornyn and Ted Cruz, joined by four of their colleagues, sent a joint letter of concern on Monday to Secretary of the Treasury Steven Mnuchin. They wrote that CITGO is in danger of falling into Russian hands because of a possible loan default by Venezuela. The state-owned oil company, Petroleos de Venezuela is the sole owner of CITGO.

“Last year, facing extreme financial pressure due to Venezuela’s economic crisis, (the state-owned oil company) used 49.9 percent of CITGO shares as collateral for a loan from Rosneft, the Russian government-owned oil company run by Vladimir Putin’s crony, Igor Sechin. Rosneft and Igor Sechin are in fact currently subject to economic sanctions due to Russia’s belligerent behavior,” the letter read.

Cornyn and Cruz said Rosneft is believed to have purchased other bonds that could bring its ownership in CITGO to more than 50 percent in the event of a default. “This could leave Rosneft, a Russian company controlled by oligarchs with close ties to Vladimir Putin, in control of critical energy infrastructure in the United States,” according to the letter, which was posted online by CNN Money.

The senators noted that in the past year, Russia “has escalated its attacks on the United States in various ways including cyber campaigns intended to sow distrust of our democratic institutions and violating arms control agreements. … As such, we are extremely concerned that Rosneft’s control of a major U.S. energy supplier could pose a grave threat to American energy security, impact the flow and price of gasoline for American consumers, and expose critical U.S. infrastructure to national security threats.”

In a letter sent to Mnuchin last week, U.S. House members Jeff Dunchan and Albio Sires, ranking members of both parties on the Committee on Foreign Affairs, noted that if it takes over CITGO, Rosneft could become the second largest foreign owner of U.S. domestic refinery capacity.

The largest share of refining capacity is held by Saudi Arabia-owned Aramco, which along with Royal Dutch Shell, is the co-owner of Motiva, which is the leading candidate to purchase the Lyondell Basell Refinery in Houston. “This would give Saudi Arabia control of two major Texas refineries proving, once again, that American energy independence is impossible,” wrote Ellen R. Ward, a contributor to Forbes.

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  • St. Anger

    Too bad no one thought to make it illegal to sell your company to an enemy of the state.

    Look what the free market dun!

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    • Cynthia Ratzke

      There are strict rules for these kinds of transactions. Seems like someone dropped the ball on this. http://www.mondaq.com/unitedstates/x/50240/Terrorism+Homeland+Security+Defence/Congress+Passes+CFIUS+Reform