This is the never ending fight for power and Russia is certainly on top of the power structure thanks to decades of American traitors combined with the public’s ignorance. PDVSA (Petroleos de Venezuela, S.A.) owns Citgo Holding Inc. which in turn owns Citgo Petroleum Corporation that has three refineries in the United States. So if Citgo or PDVSA default, Russia’s state-controlled oil company Rosneft (mostly owned and controlled by Putin and his international friends – see last article below) could end up owning strategically important oil refineries and pipelines in the United States. This will also affect South America and it’s business with Venezuela.
This could all be very dangerous for the US economy and that will, in turn, affect the entire world. But, isn’t that the idea? Of course, it is! Pretty soon we will begin to see that all the actions taken in the past have led to a slow Communist takeover.
“Russia could soon take over a chunk of U.S. oil infrastructure,” Source: news.vice.com
Still, the possibility of default has set off alarm bells in Congress, where Republican and Democratic members of the House and Senate told Treasury Secretary Steven Mnuchin they see Russia’s potential acquisition of Citgo as a threat to the country.
“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 security threats,” six senators wrote in a letter to Mnuchin dated April 10. Those senators include Democrat Robert Menendez of New Jersey and Republicans Marco Rubio of Florida and Ted Cruz of Texas.
The senators asked Mnuchin, who also chairs the Committee on Foreign Investment in the United States, the interagency body that investigates the national security implications of foreign investments, to pursue a “thorough, conflict-free, and expedient review” of the deal in the event PDVSA defaults.
“We cannot play Russian roulette with America’s energy infrastructure.”
Another letter sent to Mnuchin and signed by Republican Rep. Jeff Duncan of South Carolina and Democratic Rep. Albio Sires of New Jersey warned that
“this situation if left unchecked, could undermine U.S. national security and energy independence.”
Citgo owns three large U.S. oil refineries in Louisiana, Illinois, and Texas with a combined capacity of almost 749,000 barrels a day, or a bit more than 4 percent of the total U.S. refining capacity of 18.6 million barrels a day. Citgo-branded fuel is available at more than 5,000 locally owned retail gas stations in 29 states. The company also controls pipeline networks and 48 oil product terminals.
Russia, one of the world’s largest producers and exporters of oil and natural gas, has frequently been accused of using its enormous state-controlled energy companies, including Rosneft and natural gas giant Gazprom, as levers of foreign policy. Over the past decade, for example, Russia has repeatedly cut natural gas supplies to neighboring Ukraine in the dead of winter, prompting fears that homes would go unheated and factories would be idled.
Though Moscow has maintained those cuts were related to gas pricing and payments, they also came in the midst of years of diplomatic and, eventually, military conflict between the two countries.
Ellen Wald, a consultant on energy and geopolitics and professor at Jacksonville University in Florida, said that while Putin may seek to use his country’s energy assets to pursue policy goals, Rosneft would have limited opportunities to use Citgo to disrupt the flow of U.S. energy.
“I don’t see there would be very much they could actually do with control of Citgo,” she said. “They could potentially shut down the refineries, and that would definitely cause a rise in gasoline prices. But other refineries would eventually pick up the slack. Rosneft would lose a lot of money, and other companies would make money. That would be bad for business.”
Energy security has been a key concern of U.S. policymakers ever since the 1973 oil crisis when a group of Arab oil-producing countries declared an embargo against the United States in response to U.S. support for Israel during the Yom Kippur War.
“The risk to our national security and our economy is not one I’m willing to take,” Menendez said at a press conference Monday. “We cannot play Russian roulette with America’s energy infrastructure.”
“It is the largest privatization deal, the largest sale and acquisition in the global oil and gas sector in 2016,” Putin said.
It was also one of the biggest transfers of state property into private hands since the early post-Soviet years, when allies of President Boris Yeltsin took control of state firms and became billionaires overnight.
But important facts about the deal either have not been disclosed, cannot be determined solely from public records, or appear to contradict the straightforward official account of the stake being split 50/50 by Glencore and the Qataris.
For one: Glencore contributed only 300 million euros of equity to the deal, less than 3 percent of the purchase price, which it said in a statement on Dec. 10 had bought it an “indirect equity interest” limited to just 0.54 percent of Rosneft.
In addition, public records show the ownership structure of the stake ultimately includes a Cayman Islands company whose beneficial owners cannot be traced.
And while Italian bank Intesa SanPaolo leant the Singapore vehicle 5.2 billion euros to fund the deal, and Qatar put in 2.5 billion, the sources of funding for nearly a quarter of the purchase price have not been disclosed by any of the parties.
“The main question in relation to this transaction, as ever, still sounds like this: Who is the real buyer of a 19.5 percent stake in Rosneft?” Sergey Aleksashenko, a former deputy head of Russia’s central bank, wrote in a blog last week.
Glencore would not comment on the identity of the Cayman Islands firm or give a further explanation of how ownership of the 19.5 percent stake was divided.
The Qatari Investment Authority said it would not comment on the deal, beyond confirming that it has participated in it.
Rosneft declined to respond to questions posed by Reuters, including a request for comment on how ownership of the 19.5 percent stake was divided, information about the identity of the Cayman Islands buyer, or details of the source of any undisclosed sources of funds.
The Kremlin did not respond to a list of questions about the deal sent by Reuters.
Like many large deals, the Rosneft privatizationuses a structure of shell companies owning shell companies, commonly referred to in Russia as a “matryoshka”, after the wooden nesting dolls that open to reveal a smaller doll inside.
Following the trail of ownership leads to a Glencore UK subsidiary and a company that shares addresses with the Qatari Investment Authority, but also to a firm registered in the Cayman Islands, which does not require companies to record publicly who owns them.
The Singapore-registered investment vehicle that holds the newly privatized 19.5 percent stake in Rosneft is called QHG Shares. It is owned by a London-registered limited liability partnership, QHG Investments, which in turn lists as one of its two owners another London-registered limited liability partnership, QHG Holding, created on Dec. 5.
One of the partners in QHG Holding is QHG Cayman Limited, registered at an address of the Cayman Islands office of Walkers, an international law firm.
Jack Boldarin, Walkers managing partner in London, told Reuters the law firm would not be able to confirm whether any company was its client, or comment further.
The use of an offshore company is by itself no indication of wrongdoing, but it can make it impossible to determine the true owner of an asset from public records.
The Singapore vehicle is also the borrower for Intesa’s 5.2 billion euro loan, and QHG Holdings, the London partnership that includes the Cayman Islands firm, is a guarantor of that debt.
Banking experts say Intesa would be required by “know your customer” rules to verify the borrowers’ identities. Regulators would exercise heightened scrutiny because of the size of the deal and the need to comply with sanctions on Russia.
Reuters asked Intesa whether it knew who the beneficial owners of the Cayman company were. The bank replied with a statement:
“Intesa Sanpaolo does not comment on the details of its client operations. But we wish to reiterate that the financing was completed with strict adherence to the regulations applicable to embargoes. Italian authorities found nothing that would prohibit such an operation.”
The Italian central bank, which serves as Italy’s banking regulator, declined to comment.
If the full identity of the new owners of the Rosneft stake is a mystery, so too is the complete source of the funds with which they bought it.
Although Qatar has never publicly confirmed how much it has contributed to the deal or the size of the stake that it bought, Glencore and Rosneft say it contributed 2.5 billion euros. Along with the 300 million from Glencore and the 5.2 billion loaned by Intesa, that still leaves a shortfall of 2.2 billion euros.
Glencore has said this additional money came from other, undisclosed banks, including Russian banks, but has given no further details. The Qataris and Rosneft have declined to comment on the source of this funding.
The purpose of Russia’s privatization program is to attract overseas money to cover a budgetary shortfall caused by low oil prices and Western sanctions. Putin has therefore banned Russian state-owned banks from participating in the financing of privatization deals, which would defeat the aim of bringing in foreign capital.
But public records in Singapore show that Russia’s second-largest bank, state-controlled VTB, loaned the Singapore vehicle QHG Shares the full 10.2 billion euros that it paid to the Russian state last month to buy the stake.
VTB held the 19.5 percent Rosneft stake as collateral for that loan for part of December, before relinquishing it back to Rosneft’s state-owned parent company Rosneftegaz, which in turn relinquished it back to the Singapore vehicle when Intesa’s loan arrived in January.
VTB and Rosneft say VTB’s role in the deal was solely to reduce market turbulence which would have arisen if the 10.2 billion euros had arrived abruptly from abroad to be converted to roubles on the open market.
Apart from saying that its role was to reduce market volatility, VTB declined to comment further, including when asked if the full 10.2 billion euros was paid back, or by whom.
FINDING A BUYER
Rosneft is the world’s biggest listed oil company by output and, along with natural gas export monopoly Gazprom, one of two crown jewels of the Russian state.
Even at the best of times without the added risk of Western sanctions, there would only be a few foreign investors with deep enough pockets to buy a big stake.
Glencore, one of the main buyers of Rosneft’s crude, has Qatar’s $335 billion sovereign wealth fund, the QIA, as its largest shareholder.
Russia and Qatar have backed opposite sides for years in the war in Syria, but as the world’s two leading natural gas exporters they have good reason to cooperate on energy issues and bury some of their differences over Middle East policy.
“The idea looked appealing to Qatar. They like investing in energy. They saw upside in Rosneft. They saw upside in building relations with Russia, whose role in the Middle East politics is only set to rise,” said one source involved in talks among members of the Qatar/Glencore consortium about the purchase.
According to a source close to Rosneft’s management board, the deal came as a surprise to Rosneft’s shareholders, including Britain’s BP (BP.L), which itself owns 19.75 percent of Rosneft and is represented on its board.
The Rosneft board learned about the sale from Sechin himself only on Dec. 7, several hours after Sechin recorded his televised meeting with Putin announcing it, the source said.
In response to questions from Reuters, BP said:
“Matters of the board of directors are confidential.”
Two sources in the Russian government said the deal was also a surprise there: it had been agreed between Sechin and Putin’s Kremlin, above the cabinet. “Sechin did it all on his own – the government did not take part in this,” one of the sources said.
Prime Minister Dmitry Medvedev’s spokeswoman Natalia Timakova said:
“All documents and procedures needed for privatization were prepared and executed on time.”