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Russia could soon take over a chunk of U.S. oil infrastructure

Public Policy

Russia may soon take control of American oil and gasoline infrastructure in a deal U.S. lawmakers warn represents a threat to energy security.

Rosneft, Russia’s state-controlled oil company, could end up with a majority stake in Texas-based Citgo after the entity that owns Citgo, Venezuela’s state-owned oil and natural gas company PDVSA, used almost half of Citgo’s shares as collateral for a loan from Rosneft.

In the midst of Venezuela’s ongoing economic crisis, PDVSA is reportedly in danger of defaulting on that loan. That means Rosneft, a company specifically named in U.S. sanctions levied against Russia after its 2014 annexation of Crimea, is poised to become one of the biggest foreign owners of American oil refining capacity.

Rosneft is headed by Igor Sechin, a powerful crony of Russian President Vladimir Putin, and is often seen as a proxy for the Kremlin’s energy policies.

PDVSA put up as collateral about 49.9 percent of Citgo shares in exchange for a $1.5 billion loan from Rosneft in December. It had used the other half of Citgo as collateral for a bond deal two months before that. Should PDVSA default on its Russian loan, the Russians could relatively easily end up with a majority stake in Citgo by acquiring more PDVSA bonds on the open market.

While the exact details and time-frame of the Rosneft loan remain murky, PDVSA successfully made $2.2 billion in payments on notes that matured April 12, sending ripples of relief through financial markets.

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.”


34 Comments on "Russia could soon take over a chunk of U.S. oil infrastructure"

  1. Kenz300 on Sun, 16th Apr 2017 9:39 am 

    The sooner we end our reliance on fossil fuels the better.

  2. paulo1 on Sun, 16th Apr 2017 10:03 am 

    Might as well, they already run the political process and dialogue.

  3. Boat on Sun, 16th Apr 2017 10:26 am 

    Sun micro grid solutions is building a fleet of storage units in California. Sign of the times using technology to level peak electricity use.

  4. GregT on Sun, 16th Apr 2017 10:54 am 

    “Sun micro grid solutions is building a fleet of storage units in California.”

    24 office buildings Boat. Backed up with Tesla batteries. Big woop. Besides, California has far more serious predicaments other than electricity storage.

  5. GregT on Sun, 16th Apr 2017 11:12 am 

    California’s ‘Renewable’ Energy Grid on Verge of Crisis

    “California claims to be reducing the “state’s greenhouse gas emissions,” but about 80 percent of California’s rapidly rising electrical imports come from fossil-fuel power plants, “six percent from coal-fired plants”, and up to 14 percent from nuclear.

    With Gov. Brown’s RPS demanding rapid increases in solar and wind power generation, California’s electric grid is on a crash course to exceed its ability to import enough “excess” dispatchable power from other states.”

  6. rockman on Sun, 16th Apr 2017 11:28 am 

    “The risk to our national security and our economy is not one I’m willing to take,” Menendez said at a press conference Monday.” The most worrisome aspects of this statement IMHO: he is really sincere and thus very ignorant of the system or he realizes he’s just delivering propaganda BS to excite the public over a nonexistent danger.

  7. bobinget on Sun, 16th Apr 2017 12:02 pm 

    BOTH Russia and China will soon largely CONTROL
    North American oil pricing.
    The key to that control lies with Venezuela.

    China can halt oil shipments to the US anytime it chooses. At this time China needs to keep oil pricing low as it continues to pressure both public oil companies and nationalized production. Oil prices, at least in North America, are based on how much inventory is currently available.
    (patience, I know you know that)
    Thanks to North America’s transparency we have the only nation offering this service.

    If Venezuela continues to ship almost a million barrels
    weekly, China is not receiving its own agreed on allotments. China may be down with that as it stabilizes prices (around ($52). Venezuela is also in hock to Russia. Russia, an oil exporter, is suffering from oil prices this low. (economy in third year of strong downturn)

    So, we have Venezuela and Russia desperate for higher prices while China puts the squeeze on producers.

    China learned plenty dealing with Wal-Mart.
    WMT learned long ago they could force companies to sell their products at the lowest possible mark-ups.
    WMT can monopolize a medium size company’s entire production. As time goes on threaten to stop buying unless prices at cut not just to the bone but beneath.
    Soon, WMT gets yet another ‘Equate’ house brand.

    China controls Venezuela’s oil sales.
    China controls what Venezuelan oil goes where.

    How this shakes out with Russia and China is a guess.

    WHEN China gains control of all of Nigerian, Ecuadorian, Angola’s, percentage of North American production China can then and only then create ‘shortages’ driving prices higher for non Chinese clients.
    As we know, who controls oil pricing controls economies.

    Bob Inget

  8. bobinget on Sun, 16th Apr 2017 12:10 pm 

    Correction: I intended to write; China can withhold
    “Venezuelan” oil shipments.. not all shipments.

  9. rockman on Sun, 16th Apr 2017 2:36 pm 

    Bob – China, Russia and anyone else has always been free to get between the US refineries and any of our oil sources. Who owns Citco isn’t relevant. OTOH given the US exports the refinery products made from about 4.8 million bbls of oil per day that’s about half of our imports we don’t need to supply US consumers. Might really piss off the Mexicans, Canadians and Japanese since they are the largest importers from the US. And quit a few other countries since the US is the largest exporter of refinery products on the planet.

  10. Davy on Sun, 16th Apr 2017 3:30 pm 

    Rock, bob has a China fixation.

  11. Apneaman on Sun, 16th Apr 2017 4:36 pm 

    Your fossil fuel overlords are trans-national profiteers and are loyal to no country. They just use your primitive tribal/patriotic emotions to play you. If they could swing it there would be no borders, but since there are it seems wearing a national flag lapel pin and telling you how “special” you are is all the strokes it takes to keep stringing you along and paying for their military protection and security state services – AKA your own enslavement. If you’re lucky and continue to remain quiet and on your knees you may still receive some more “trickle down”.

  12. makati1 on Sun, 16th Apr 2017 5:51 pm 

    Ap, the “trickle down” has always had a foul smell and a yellowish color. The trans nationals are working to erase borders and make the planet one big slave plantation and we are the slaves.

    A few here still wave that bloody rags with the stars and stripes like it actually meant something. It does. Ancient history. Now it should be blood red and money green stripes with the corporate logos for stars. The aircraft carriers should have names like Exxon, Chevron, Pfizer, Apple, Microsoft, Kraft, etc. The money god rules.

  13. onlooker on Sun, 16th Apr 2017 6:41 pm 

    Well said AP and MAK

  14. GregT on Sun, 16th Apr 2017 9:30 pm 

    “Rock, bob has a China fixation.”

    Considering China’s growth over the last couple of decades, compared with the empire’s decline over the same period of time, sounds like bob is on to something.

    How long before we have to teach bob the secret hand shake? Or can bob remain independent from ‘The Gang’? Time will tell.

  15. Nony on Sun, 16th Apr 2017 10:44 pm 

    I don’t think the Russian ownership of some assets is a big deal. Bigger issue is if there are US companies that have claims against the Venezuelans and this deal is being used to funnel assets to one debtor versus another. Even then it may be legit–have to look at the details.

  16. rockman on Sun, 16th Apr 2017 11:16 pm 

    Your fossil fuel overlords are the consumers. They demand the industry and govt keep supplying them while making producers dependent on their largesse. And are not even loyal to there fellow citizens: the folks in CA would let those in NYC freeze in the dark if it’s necessary to keep their gas tanks full.

    And many of those consumers are so unable to accept their guilt of being the largest group DIRECTLY generating GHG they continually try to shift the responsibility to anyone else.

    So sad to watch them squirm. LOL

  17. Midnight Oil on Mon, 17th Apr 2017 12:30 am 

    It’s ALL the consumers fault!!!
    Boy, talk about screwed up rationalization by ROCKMAN…Dang, remember hearing from my parents how there were trolleys in their day and not needing an personal automobile to get around. Well, we ALL know what happened,dont we ROCKMAN? Yes Sir, maybe there was a little arm twisting in that demand.
    Who are you kidding, buddy?


  18. Anonymouse on Mon, 17th Apr 2017 4:36 am 

    Its rockermans latest trope, ‘consumers’ are to blame for all the negative externalities uS oil creates. The oil cartel, as we now know, is 100% blameless, has been all this time, who knew? Well rockerman did, and thanks you his diligence, you can all stop blaming his beloved oil cartel now. There just doing gawds (consumers) work after all.

  19. deadlykillerbeaz on Mon, 17th Apr 2017 5:05 am 

    After Washington imposed sanctions on Russia over its role in Ukraine in 2014, Russia’s public health watchdog briefly closed down dozens of McDonald’s outlets, including its original Moscow flagship in Pushkin Square, citing hygiene concerns.

    Some Russian politicians called for the chain to be shut down completely.

    McDonalds has restaurants in Russia, for Christ’s sake. If a Happy Meal can be sold in Moscow, then, by golly, Russian-owned gas stations can sell gas in Washington DC.

    Last I looked, Moscow is a modern city too.

    You have to forget about politicians, they lie, cheat, and steal. The biggest babies in the world and they bawl like babies when things don’t go their way. If they’re not bawling in Moscow, they’re bawling in Washington, DC.

    Plenty of evidence supporting the facts that politicians of any stripe are purdy much idiots no matter where they hail from. You’re better off poking a fun at them, they’re fair game. They are going to go straight to hell when the time comes. Besides, they’re just stupid people and you can’t pay attention to them, those clueless politicians. Laughing stock.

    Incredibly stupid to not do business with the Russians, Seward bought Alaska from them, so it has been done in the past. They’re shrewd horse traders, no doubt. Always do business with them, you have to, and it is much better to see eye to eye.

    You’ve got to go to California to see what’s there. Giant redwood trees, Mt. Shasta, the Pacific, it’s a groovy place. Don’t have to live there to see it, you can drive a car or fly a plane and be there in a day or so.

    One convenient luxury on this earth, an automobile. Some gasoline to be on your way, you’re gone, 50 gallons will take you a good thousand miles, easy.

    I don’t care who is selling gas, if the Russians want to sell some in Las Vegas, more power to them.

    When you finally make it up to Seaside in Oregon, you’ll know the Pacific is a sight not soon to be forgotten.

    When I need some and if Lukoil is selling it along the way to San Jose, I’ll buy it from Lukoil. I’ll say it again, I just don’t care who has it available for sale, you can remain on the go and that’s what counts.

    Don’t kid yourself, everybody likes oil.

  20. Davy on Mon, 17th Apr 2017 5:08 am 

    Glad, you finally realized your ways Greg. Yea, Bob is an anti-American American. He believes and shows every desire to see China kick ass. He admires the growth and discounts anything bad out of China. He hates his country and now that trump is in power he is especially vocal. Like makati, bob is one failed China prediction after another. Greg, you are the paramount anti-American closet nationalist. It is a club here and it shows unfortunate intellectually laziness to an otherwise great forum. You are a club leader. The more vile the greater the admiration from the Anglos and the self-hating Americans. Where is the balance in that? Can one find truth by being an extremist? It makes it twice as hard because first you must get through the self-deception.

    Greg, you spend most of your time here attacking boat and plant. The primarily reason is they are American. I admit they are a bit goofy and stymied. You take it to a sick level of obsession because of your closet nationalism. I might add something you go to great lengths to deny. Yes, I attack makati but he spends his moronic days attacking me unjustly directly and indirectly. It is called self-defense. I admit to my obsessions but I have offered peace to the dumb old man but he has too much support here from the club. You have no reason to attack boat and planter. They don’t attack you unless you piss on them excessively as you do daily, redundantly, and peevishly. You, as a dumbass Canadians want to feel something because you are really just a stupid little country that is the little rump of the US. The US does something and you little people jump. To deal with that disgrace you have to show toughness that in the end shows how stupid you are.

  21. Davy on Mon, 17th Apr 2017 5:11 am 

    “I don’t think the Russian ownership of some assets is a big deal. Bigger issue is if there are US companies that have claims against the Venezuelans and this deal is being used to funnel assets to one debtor versus another. Even then it may be legit–have to look at the details.”

    Good observation Nony and one the anti-Americans can’t stand. This anti-Americanism has to be all about one upping the other instead of seeing the real nature of globalism and the geopolitical order.

  22. Davy on Mon, 17th Apr 2017 5:17 am 

    “And many of those consumers are so unable to accept their guilt of being the largest group DIRECTLY generating GHG they continually try to shift the responsibility to anyone else. So sad to watch them squirm. LOL”

    Another great observation from Rock and one the fake greens can’t stand or a dumbass anti-American Canadian like any mouse. Used to be any mouse blamed the Canadian tar sands on the US. This is understandable because he is a Canadian millennial and 4th gen anti-American. The extremism is magnified in the young lad 4 square.

  23. Davy on Mon, 17th Apr 2017 5:24 am 

    Killer Bee, you are spot on. I think it is ludicrous we have the issues we have with Russia in the first place and on all levels. They deserve respect on the world stage and the neocon/neoliberals and their spooks just can’t share respect. This whole bad attitude thing might get us killed when we could be working together to make things a little better before times get really bad….for all of us.

  24. AFDF on Mon, 17th Apr 2017 7:20 am 

    everyone wants to take over russia and eventually the US will too. It will be a big mistake or it won’t. Modern warfare is different.

  25. Dredd on Mon, 17th Apr 2017 8:49 am 

    Like all cancers, Oil-Qaeda “is not an American company” (MOMCOM: The Private Parts – 5), a Russian company, a Saudi Arabia company, or any other single nation’s company.

    Cancers are not defined by national boundaries: “After years of preparation, ExxonMobil and OAO Rosneft have received the go-ahead to begin drilling a $700 million Arctic Ocean oil well in the Kara Sea. The well, which will be Russia’s most northerly, is to be the first of as many as 40 offshore wells planned for the Arctic by 2018.

    The well will access a geological formation roughly the size of the city of Moscow. The formation is expected to contain roughly 9 billion barrels of oil.

    Speaking from the Black Sea resort town of Sochi, Russian President Vladmir Putin lauded ExxonMobil, calling the company Russia’s “old and reliable energy partner” (Deepwater Horizon Keeps On Killing & Drilling – 3).

  26. bobinget on Mon, 17th Apr 2017 12:14 pm 

    The real story centers around the Venezuelan Revolution, 2.0

    Everyone, meaning almost every Venezuelan will be taking to the streets Wednesday. If the army fires live ammunition into the demo, Maduro invites intervention.

    Venezuela isn’t Somalia, Syria or Libya or Sudan or Iraq or Afghanistan or Nigeria.
    However, the excuse for intervention will be to avert such outcomes. As usual the left will cry crock tears
    over ‘The West’ taking Venezuela’s oil and thus a ‘civil’
    war cranks ahead.

    Meanwhile, China continues to squeeze the limit out of world oil thereby keeping prices in check.
    Russia, fearing backlash at home, desperately needs $60 oil.

    Just as President Trump squanders borrowed money on more arms, tax cuts for rich, instead of social programs or genuine infrastructure rebuilding, Presidents Putin and Maduro are at a loss to do anything other then military action.

    Before China and Russia duke it out over Venezuela,
    the least we should know they are at loggerheads.

    China just reported growth gains of over 6%.
    China’s (and India’s 7.5%) oil and gas (agriculture) requirements are growing in direct proportion to populations.

    I still maintain if the ‘West” would send in a dozen container ships loaded with vital consumer goods,
    the entire crisis could be tamped down.

    Sending in marines only burns down another oil country.

    In the event of ANY military intervention, don’t expect Venezuela to continue delivering crude.

    Clearly, China doesn’t want chaos. China might well
    come up with more loans as a temporary fix.

    As for oil prices: take another 1.5 million BB p/d out of an already crippled world production and expect economically killing, triple digit prices.

  27. bobinget on Mon, 17th Apr 2017 12:20 pm 

    No help for Venezuela but two more carrier groups headed to NK. If this doesn’t get us into another
    “Police Action” in Korea nothing will.

  28. rockman on Mon, 17th Apr 2017 1:40 pm 

    Midnight – “Yes Sir, maybe there was a little arm twisting in that demand”. Well, fine and dandy: tell us all how you were forced to consume all the fossil fuels burned for your benefit in 2016. I’m sure you and A. have interesting stories everyone here is absolute to hear. LOL.

  29. Davy on Mon, 17th Apr 2017 2:12 pm 

    Looks like China and Russia will pay handsomely for their Venezuelan adventures. Let’s see if they will throw some good money after bad. Both have zero ability to project force in Venezuela. Russia is preoccupied with Syria and NATO. China has the NK. Venezuela is at a turning point without much of a future either way it turns. It is our future at some point so watch closely.

  30. Sissyfuss on Mon, 17th Apr 2017 2:33 pm 

    Rock, I like you just like my stepdaughter liked her crack dealer.

  31. GregT on Mon, 17th Apr 2017 3:05 pm 

    So now I have been elevated to ‘a leader’ of your imaginary little club Davy?

    Have you ever wondered why so many here think that you’re delusional?

  32. GregT on Mon, 17th Apr 2017 3:07 pm 

    “Both have zero ability to project force in Venezuela.”

    Everything looks like a nail, when all you have is a hammer.

  33. dissident on Mon, 17th Apr 2017 3:10 pm 

    Yet more evidence what a collection of whiny, bloody hypocrite prats Americans are. When their corporations control countries that is God’s Will (TM), but perish the thought of getting a tiny drop of their own medicine.

    This reaction should be used to justify any law around the world designed to keep American influence at bay. What is good for the goose is good for the gander.

  34. makati1 on Mon, 17th Apr 2017 5:00 pm 

    GregT, right on! LOL The U$ only has military not diplomacy or intelligence, or even money. China and Russia open their wallets and negotiate, not fire Tomahawks or drop MOABs. And Americans wonder why they are hated by most of the world.

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