Citibank took control of tons of Venezuelan gold under warranty and could sell it

Citibank took control of tons of Venezuelan gold after the country's central bank (BCV) did not buy this month the metal that guaranteed a loanand is now considering selling it and depositing the surplus in a bank account, according to sources close to the deal.

Venezuela uses the gold from its reserves to raise money, since it has suffered since 2015 a sustained decline in its oil revenues, its main source of foreign currency, in the midst of an economic crisis. However, As of 2017, it has only been partially able to recover its holdings.

In terms of the transaction agreed with Citibank in 2015, Venezuela had to pay by March 11, 2019 $ 1,100 million of the total loan of 1,600 million euros to recover some of the gold at the same time. 39, a redemption, said four sources who requested anonymity. The remaining amount expires next year.

Citibank plans to sell gold as collateral for $ 1.358 billion to recover the first installment due and deposit approximately $ 258 million into an account in New York, according to two sources.

The payment capacity of Nicolás Maduro's regime has been complicated not only by the economic situation, but also by a series of financial sanctions imposed by the United States and European countries that do not recognize him as a legitimate president after being re-elected . elections

During the worst political crisis that the oil country has seen in decades, the head of parliament, Juan Guaidó, was proclaimed interim president in January, citing articles of the Constitution after accusing Maduro of illegitimacy. The United States and dozens of nations have recognized it and asked Maduro to leave power.

As part of Guaidó's attempts to gain control of Venezuela's holdings abroad, they asked Citibank in February for a grace period of 120 days before the redemption date. But three of the sources, from the Guaidó sector, said the bank had not responded to the request.

"The agreement for this gold buyout has already expired and the BCV has not complied," said one of the sources consulted. A fourth source of the Venezuelan regime aware of the operation confirmed that the Central Bank had not transferred the money this month to comply with the agreement with Citibank.

In a report submitted to the US regulator in February, Citibank said the agreement with Venezuela gave it "all property rights and legal rights over gold for $ 1,600 million". The Central Bank did not immediately respond to a request for information on this case and Citibank declined to comment.

Because of this experience, sources believe that there is little incentive for the Venezuelan Central Bank to reinvest gold with the US bank.

Guaidó has already taken control of a refinery complex owned by the state PDVSA, in the United States, Citgoand seeks to freeze bank accounts and gold bars abroad owned by Venezuela.

Citgo, Venezuela 's main badet abroad, serves as collateral for a PDVSA loan and a loan from the Russian oil company Rosneft. For this reason, Guaidó's advisers plan to pay $ 72 million in interest on the PDVSA 2020 bond in the coming weeks, in order to avoid an embargo on Citgo, sources from Guaidó's environment said. specify where this money would come from.

Faced with the possibility that they envisage the possibility of a political transition, the Guaidó held preliminary talks with US legal advisers on a possible external debt restructuring process and be ready for any hostile action from creditors, according to two of the opposite sources.

The intention is to be ready to negotiate not only with Venezuelan bondholders, but also with lending governments such as those of China and Russia and with companies affected by the wave of nationalizations under Chavez.

Venezuela faces bond breaks for around $ 60,000 million since 2017. But companies such as Conoco and Crystalex are demanding millions of dollars in compensation after the decision of the late President Hugo Chávez, who preceded Maduro, to exclude them from oil and mining projects.

"We want to treat the debt globally, we estimate it would reach 200,000 million dollars," said one of Guaidó's close sources, whom Maduro considers a puppet of the United States, a country that he accused of wanting to move him away from power. seize the oil wealth.

(With information from Reuters)