Russia’s Move to Own Citgo, Rosneft is Sanctioned

Primer:

From the gasoline that helps your family take vacations to the advanced medical equipment at your community hospital, CITGO is fueling good.

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It’s amazing the difference petroleum-based products make in our everyday lives. Based in Houston, Texas, CITGO is a refiner and marketer of transportation fuels, lubricants, petrochemicals and other industrial products. In addition to these products, there’s probably a CITGO in your neighborhood, a convenient place to fill up with gas and grab a quick snack.

The story of CITGO Petroleum Corporation as an enduring American success story began back in 1910 when pioneer oilman, Henry L. Doherty, created the Cities Service Company.

When Cities Service determined that it needed to change its marketing brand, it introduced the name CITGO in 1965, retaining the first syllable of its long-standing name and ending with “GO” to imply power, energy and progressiveness. The now familiar and enduring CITGO “trimark” logo was born.

Occidental Petroleum bought Cities Service in 1982, and CITGO was incorporated as a wholly owned refining, marketing and transportation subsidiary in the spring of the following year. Then, in August, 1983, CITGO was sold to The Southland Corporation to provide an assured supply of gasoline to Southland’s 7-Eleven convenience store chain.

In September, 1986, Southland sold a 50 percent interest in CITGO to Petróleos de Venezuela, S.A., (PDVSA), the national oil company of the Bolivarian Republic of Venezuela. PDVSA acquired the remaining half of CITGO in January, 1990 and the company is owned by CITGO Holding, Inc., an indirect, wholly owned subsidiary. With a secure and ample supply of crude oil, CITGO quickly became a major force in the energy arena.

Russia To Become Second-Largest Foreign Owner Of U.S. Domestic Refineries, If Venezuela Defaults

Venezuela’s state-owned oil company, Petroleos de Venezuela (PDVSA), has owned Citgo, an American refiner with headquarters in Houston, Texas, since the 1980s. At the end of 2016, cash-strapped Venezuela, in the throes of a combined economic and political crisis,[1] put up a large stake (49.9%) in Citgo as collateral in exchange for a loan from the Russian state-owned oil company Rosneft. Should PDVSA default on the loan, Rosfnet will gain control over Citgo. It is noteworthy that the U.S. imposed sanctions on Rosfnet following Russia’s seizure of Crimea in 2014.

On May 3, a bipartisan group of U.S. Senators introduced a wide-ranging bill calling for sanctions against the Venezuelan government and demanding President Donald Trump to prevent a deal struck by PDVSA and Rosfnet. CBS News reported: “The bill calls for the [U.S.] State Department to coordinate an international response to the crisis in Venezuela… In addition, a section of the bill highlights a Nov. 30 loan given by Russia’s state-owned oil company, Rosneft, to Venezuela’s state-owned oil company PDVSA. The deal would allow the Russian company to take control of nearly half of the U.S. oil company Citgo, which PDVSA owns, if Venezuela defaults on its debts.

“Influential senators from both parties sponsored the bill, including Senators Ben Cardin, D-Md.; Marco Rubio, R-Fla.; John Cornyn, R-TX; Dick Durbin, D-Ill.; John McCain, R-Ariz.; Bill Nelson, D-Fla.; Tim Kaine. D-Va.; Chris Van Hollen, D-Md. and Bob Menendez, D-NJ.”[2]

Earlier, Republican Congressman Jeff Duncan and Democratic Congressman Albio Sires sent a letter to U.S. Secretary of Treasury Steven Mnuchin, asking him to undertake an “immediate review of a recent asset transfer between Venezuela’s state-owned oil company. PDVSA, and Rosneft, which is under U.S. sanctions. The situation, if left unchecked, could severely undermine U.S. national security and energy independence.”[3]

On April 14, the Russian media outlet Vestifinance.ru, published an article titled “Rosneft And Citgo: Risk Or Anti-Russian Hysteria?” The article stated that U.S. lawmakers’ actions against The PDVSA-Rosneft deal are prompted by anti-Russian “hysteria.” Vestifinance.ru wrote: “By an amazing coincidence, a letter to Mnuchin was written just before U.S. Secretary of State Rex Tillerson’s visit to Moscow. And as long as relations between Moscow and Washington are not improved significantly, politicians will keep finding new pretexts to incite fears.”

Below are excerpts from the Vestifinance.ru article:[4]

(Source: Rt.com)

PDVSA Still Owes Russia $62 billion

“PDVSA, the Venezuelan state-owned oil company, has paid off its [Russian] loan along with interest in the amount of $2.2 billion. This is good news as PDVSA avoided a default. However, the Vice President [of Venezuela] Tarik El Aissami characterized the situation as ‘a merciless economic war’ being waged against the Maduro government. The bad news is that PDVSA still owes [Russia] $62 billion.

“It is well-known that some members of the U.S. Congress are quite concerned about a possible default by Venezuela, since Russian-owned Rosneft can then get access to the American company Citgo. Citgo owns 48 oil terminals in 20 U.S. states as well as 3 oil refineries. It is the control of Rosneft over the American refineries that worries lawmakers the most.

“‘The Russian government could readily become the second-largest foreign owner of U.S. domestic refinery capacity. Such a development would give the Russians more control over oil and gas prices worldwide, inhibit U.S. energy security, and undermine broader U.S. geopolitical efforts’, [U.S. congressmen] wrote in a letter to Treasury Secretary Steve Mnuchin. ‘We remain deeply concerned over the implications for U.S. national security.’

How Rosneft Can Take Over CITGO

“Venezuela has been desperate for cash lately. Petroleos de Venezuela (PDVSA), the Venezuelan state-owned oil company, has owned Citgo since the 1980s. In exchange for obtaining a loan from Rosneft in December, the Venezuelan oil company put up a large stake (49.9%) in Citgo as collateral. If PDVSA is unable to pay off the loan on time, Rosneft will almost certainly gain control over Citgo. All Rosneft would need for a majority share would be to buy a few more PDVSA bonds, thus clearing the 50% threshold of ownership.

[Rosneft] Is Not Going To Waste Money For The Illusory Opportunity To Harm The U.S.’

“The concerns expressed by [the U.S] congressmen are rather strange. What exactly is Rosneft going to do with three oil refineries? U.S. politicians believe that the Russian company will be able to take part in a conspiracy that will lead to a restriction of gasoline production, raise gas prices and thus cause damage to the U.S. national security or the American economy. This is plain silly. Even though Rosneft is a state-owned company, its purpose is still making profit, and it is not going to waste money for the illusory opportunity to harm the U.S. And the scenario offered by congressmen has no bearing on reality whatsoever. “Three refineries is a mere drop in the ocean compared to the rest of the U.S. oil assets. Even assuming that production could be reduced at these refineries, this may at most affect one region in the short term, but then other producers will quickly capture the market and stabilize it. And so if Rosneft takes over Citgo, it will simply produce and sell gasoline in the U.S., making money on it, rather than making insane plans to threaten the U.S. national security.

“Reports in the U.S. media treat the lawmakers’ letter with a healthy dose of irony and that is why it is difficult to avoid the conclusion that the congressmen are deliberately trying to incite anti-Russian fears. By an amazing coincidence, a letter to Mnuchin was written just before U.S. Secretary of State Rex Tillerson’s visit to Moscow. And as long as relations between Moscow and Washington are not improved significantly, politicians will keep finding new pretexts to incite fears.

“As far as Venezuela is concerned, yielding control of Citgo is a good way to reduce its debt burden. Most likely, this will happen no later than in the fall of 2017, since there is very little chance its economy will stabilize. Most likely, Venezuela will default and begin to restructure its debt this year. According to the credit-default swaps market, investors estimate the chances of Venezuela’s default in the next six months at 41%. And in March that indicator was below 34%.”

(Source: Latinamericapost.com)

 

 

[1] See MEMRI Special Dispatch N. 6903, Russia’s Support For The Venezuelan Regime – An Update, May 2, 2017.

[2] Cbsnews.com, May 3, 2017.

[3] See letter sent by Congressmen Jeff Duncan and Albio Sires.

[4] Vestifinance.ru, April 14, 2017.

John Kerry, Ben Rhodes launch new Push to Protect Iran

Take note of names John Kerry has mobilized for this mission:

Tony Blinken, Nicholas Burns, Puneet Talwar, Robert Malley, Jon Finer, Jen Psaki and Jeff Prescott.

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Of course Madeleine Albright is part of this operation via J Street. This lobby operation known as J Street labels itself as pro-Israel and pro-peace….ah not so much. Read here to understand more on what J Street is all about.

Top officials from the Obama administration are working to stymie congressional pressure on Iran, including through a quiet push in Congress by an organization that has been criticized for helping mislead the public about the Iran deal, according to correspondence obtained by THE WEEKLY STANDARD.

The Ploughshares Fund, described by the Obama White House as a key promoter of the nuclear deal, distributed a letter to congressional staffers last week written by former Obama Treasury official Adam Szubin that harshly criticizes pending Iran sanctions legislation.

Ploughshares came under fire last May for giving hundreds and thousands of dollars to media outlets and fueling what Obama Deputy National Security Adviser Ben Rhodes admitted was an “echo chamber.” A Ploughshares official cc’d Szubin on the email with the letter, and welcomed congressional staffers to reach out to him for further discussion. The sanctions bill is expected to move forward in coming weeks.

“[The legislation] would provoke a terrible reaction in Iran and with our allies,” Szubin wrote in the letter, addressed to leaders of the foreign relations committee. “[It] would contribute no benefit, as it would impose no additional pressure on Iran’s malign activities outside of the nuclear space.”

The congressional push coincides with the launch of an organization backed by former Obama officials, with Secretary of State John Kerry at the fore, many of whom are vocal opponents of the sanctions legislation. The group, Diplomacy Works, aims to “promote, protect, and preserve” the nuclear deal by informing and influencing lawmakers, experts, and others, according to a statement on its website.

Experts who fought against the nuclear deal in 2015 told TWS that the Obama team’s renewed push is all too familiar.

“The Obama defenders of the [nuclear deal] are terrified that the Trump administration will end the Obama paralysis of U.S. policy towards the Iranian regime,” said one Iran expert who played a major role in push back against the nuclear deal. “They will fight tooth and nail any sign of a more robust and hard hitting policy to rollback and subvert Iranian aggression.”

Another long-time Middle East expert closely involved in the fight against the deal said the officials are mobilizing to ensure that lawmakers do not impose additional pressure on Iran.

“The same people who promised that the nuclear deal would enable Congress to push back against Iran—literally the very same people—are now mobilizing to prevent any pressure against Iran over its threats to us and our allies,” the adviser told TWS.

“Of course that gives away the game, doesn’t it?” the adviser continued. “The goal of the Iran deal was never to prevent Iran from getting nuclear weapons, but instead to empower Iran by giving it something to use as blackmail against U.S. pressure.”

Turkey Evicting U.S. from Base Incirlik, Turkey?

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Incirlik Air Base, NATO

Primer: Last year with the attempted coup and the declining relationship between the United States and Turkey, a report to Congress weighed the alternatives to stationing nuclear weapons at Incirlik. Moving the warheads could possibly encourage Russia to cooperate more and possibly reduce their nuclear stockpile, though nothing guarantees that. More here.

Germany likely to pull troops out of Incirlik air base

The Berlin government is mulling moving its troops out of Turkey’s Incirlik air base after a second snub by Ankara. A German political delegation was denied approval to visit Bundeswehr soldiers at the military facility.

Wolfgang Hellmich, the chairman of the Bundestag Defense Committee, told the German news agency dpa “we’re not going to be blackmailed” by the Ankara government after a second German parliamentary delegation was prevented from visiting Turkey’s Incirlik facility. The air base is being used in the international fightback against so-called “Islamic State” (IS) militants.

Go here for video.

A decision on where to move the Tornado units is likely to be made in the next few weeks, with Jordan seen as a favorite, sources from the Bundestag committee said.

New tensions

Turkey’s latest snub follows Germany’s decision to grant asylum to a number of Turkish military officers, who faced persecution following Turkey’s failed coup on July 15 last year, according to dpa.

German Chancellor Angela Merkel called Turkey’s latest move “unfortunate” in remarks to reporters in Berlin earlier in the day.

“The Bundeswehr is a parliamentary army and this makes it absolutely necessary for our lawmakers to have access to our soldiers,” Merkel said.

Turkey refused last year to grant German MPs access to the air base, only relenting in October after months of waiting.

The reason given then was that Germany had recognized the crimes committed by Ottoman Turks against Armenians in 1915 as constituting genocide.

Relations between Turkey and Germany have been in a downward spiral in recent months, with many German lawmakers outraged at what they see as flagrant repression of freedoms during Ankara’s post-coup crackdown. Dozens of journalists  have been imprisoned – including the German-Turkish writer Deniz Yucel-and authorities have carried out  mass sackings and arrests of public officials.

Ankara was also incensed by Berlin’s refusal to allow Turkish ministers permission to attend political rallies aimed at Turkish voters living in Germany in support of a referendum granting President Recep Tayyip Erdogan greatly extended powers. Many observers see Erdogan’s referendum success as a further step toward establishing an autocracy in Turkey.

Bundeswehr is key partner

Germany currently has several Tornado surveillance aircraft and a refueling plane deployed at the Incirlik military base in southwestern Turkey. The jets are part of the international coalition carrying out aerial attacks on IS positions in Iraq and Syria. Some 260 German military personnel are stationed there.

Image result for u.s. base incirlik turkey BusinessInsider

Meanwhile,

WASHINGTON (AP) — President Donald Trump will hold his first face-to-face meeting with Turkey’s president Tuesday amid accusations that Trump gave Russian officials classified intelligence from a foreign ally.

Trump and Turkish President Recep Tayyip Erdogan are expected to address the Syrian civil war, refugee crisis and the fight against the Islamic State group, including the U.S. decision to arm Syrian Kurdish fighters despite Turkey’s vehement objections. More here from AP.

*** As such, there is a move to evict the United States from Incirlik due to the matter of the Kurds being in full support by the United States.

WASHINGTON — A prominent Turkish newspaper has demanded the eviction of U.S. troops and warplanes from Incirlik Air Base as fallout there worsens from the Trump administration’s controversial move to arm a Kurdish militia fighting the Islamic State in neighboring Syria.

In a front-page editorial published Friday, the newspaper Sozcu called for Incirlik’s complete closure. It’s an unlikely outcome, military officials and observers say, but a clear sign of how dramatically relations have deteriorated between the NATO allies.  The blustery display of anti-Americanism comes as the U.S.-backed coalition in Syria, which is poised to launch a long-awaited offensive to liberate the ISIS stronghold of Raqqa, faces widespread criticism across the border for its dependence on the YPG. The Kurdish militia force has emerged as America’s most capable proxy there, but Turkey maintains it’s a terrorist organization and has actively targeted the group’s fighters in recent weeks.

The editorial is noteworthy, too, because Sozcu’s coverage has been deeply critical of the Turkish government under President Recep Tayyip Erdogan, who expressed similar outrage when Washington’s new arms deal with the YPG was announced last week and warned that supporting the Kurds would elicit blow-back. Erdogan is likely to vent his frustration to President Donald Trump when the two leaders meet this week at the White House.  Turkey approved the U.S. to fly attack and strike aircraft from Incirlik beginning in 2015, including for close-air support missions conducted by A-10 Thunderbolts. Additionally, the U.S. bases EA-6B Prowlers there, which can jam ISIS communications and improvised explosive detonators, and the KC-135 Stratotankers responsible for aerial refueling.

In May 2016,  aircraft based at Incirlik accounted for nearly one-third of the international coalition’s refueling operations and one-fifth of its close-air support. Today, those numbers are likely much higher as the war’s tempo has intensified.

At the same time, Incirlik has become increasingly less hospitable for the 2,500 U.S. troops assigned there. Citing security concerns, commanders first locked down the base two years ago, prohibiting personnel and their families from venturing beyond its gates. Then, in March 2016, all 700 family members who remained there were ordered to evacuate.   Inside the Pentagon, arming the YPG is seen as a calculated gamble. To facilitate its air campaign against ISIS, the U.S. relies on Incirlik’s proximity to Syria and Iraq — so there is some risk in alienating the Turks. Yet following last summer’s coup attempt, Erdogan remains unpopular among large segments of Turkish society and, despite his rhetoric, most assuredly sees advantages to keeping the U.S. close.

Retired Adm. James Stavridis, NATO’s supreme allied commander from 2009 to 2013, said Turkey is unlikely to close the base to U.S. operations because Ankara benefits significantly from associated economic incentives and intelligence sharing. “Turkey,” he added, “still values the NATO alliance, which brings prestige and a measure of security in a dangerous neighborhood.”

Consider Operation Nomad, which since 2011 has provided Turkey with intelligence gathered by U.S. drones and beamed into joint fusion centers operating out of Ankara and Incirlik. Those feeds have supplied vital information about terrorists’ movement across northern Syria and Iraq, intelligence Turkey is unlikely to surrender.

Officials at U.S. European Command echoed those sentiments. “Turkey closing their base, that would be hard to believe,” said Capt. Daniel Hernandez, a spokesman. Incirlik, he added, is “strategically important to them and the coalition.”

There would be painful political costs, too, said Aaron Stein, an expert on U.S.- Turkish relations at the Atlantic Council, a Washington think tank. “They would be blamed internationally for slowing the war against the Islamic State,” he said.

No, “Turkey has concluded it is better to be on the in than the out,”  Stein added. “At least on the in, you have a say at every coalition meeting.”