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Venezuela arrests six top executives from PDVSA's US subsidiary Citgo

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Caracas (AFP)

Venezuela on Tuesday arrested the acting president and five other top executives in charge of Citgo, the US refinery subsidiary of troubled state oil company PDVSA, on corruption charges.

"Six senior executives have been arrested," said chief prosecutor Tarek William Saab, adding that the charges were for embezzlement, collusion over contracts, money laundering and criminal association.

The Citgo chief, Jose Angel Pereira, was arrested in Caracas.

The place and circumstances of the arrests of the other executives -- Citgo vice presidents Tomeo Badel, Alirio Zambrano, Jorge Toledo, Gustavo Cardenas, Jose Luis Zambrano -- were not given.

Their arrests come just a week after Saab announced the apprehension of a deputy minister and nine PDVSA officials for allegedly doctoring crude production figures.

The rash of arrests underline the debt woes swirling around PDVSA, which is the prime source of income for Venezuela, a country that sits atop the world's biggest oil reserves.

Both PDVSA and Venezuela are staring down the barrel at default on a debt pile estimated at up to $150 billion.

A partial default has already been declared, with an influential creditors' committee ruling that PDVSA had failed to make payments on time.

- Sensitive asset -

That is setting the scene for all holders of Venezuela government and PDVSA debt to possibly call in their IOUs at once -- an impossible call for Caracas, which has less than $10 billion in hard currency reserves left.

Maduro has said he wants to refinance and restructure Venezuela's debt, whose hefty servicing is diverting needed funds from imports of food and medicine, both of which are severely lacking in his country.

But that effort is complicated by sanctions from Washington which ban US entities buying new, longterm debt from PDVSA or the Venezuelan government, or from dealing with certain key Venezuelan officials.

Citgo is an especially sensitive asset for PDVSA, which bought full control of it 27 years ago -- before the Socialist regime installed in Venezuela by President Nicolas Maduro's late predecessor, Hugo Chavez, came to power in 1999.

The subsidiary has three oil refineries in the United States, in the states of Texas, Louisiana and Illinois. They have a total refining capacity of 750,000 barrels per day, or around four percent of total US refining production. The three plants employ about 4,000 people.

Citgo also owns three pipelines and stakes in three more. It has 48 petroleum terminals.

- Used as debt collateral -

But PDVSA has put 50.1 percent of Citgo up as collateral to guarantee its debts, particularly to Russian state oil giant Rosneft. That has unnerved US authorities who don't want to see the company fall into Russian hands.

Saab said the arrest of the six senior executives was related to contracts they signed with two companies, Frontier Group Management and Apollo Global Management, for a supposed restructuring of $4 billion in debt.

He said the terms of the restructuring were "unfavorable for our main industry, which is PDVSA" and "most seriously" offered Citgo as a debt guarantee.

"This is the most rotten sort of corruption that needs to be punished and sanctioned, independent of who is involved, even the highest management of Citgo. They have to answer to justice," Saab said.

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