Say you’re a PDVSA official circa 2013-2014. Which country would you say you can least afford to shaft? Probably China, right? I mean, you need China as a customer, as a supplier, as a creditor, as a geopolitical patron, as an…everything.
And yet shaft China is precisely what PDVSA decided to do, starting in 2012, over the most trivial matter possible: payment on $43.5 million worth of steel re-bars (a.k.a., cabillas) that China’s state-owned Sinopec shipped to Venezuela and didn’t get paid for in full.
The case eventually ended up in front of a judge in the U.S. — which does rather show exactly how much each side trusts the other’s judges.
In a document filed on Tuesday in a US district court in Houston, Texas, PDVSA said that, “without implying acknowledgment of fault or responsibility but for the sole purpose of ending the controversy [between Sinopec USA and PDVSA]”, it agreed to pay Sinopec $21.5m, settling a contract agreed in May 2012.
However, the agreement stipulates that the amount be converted into Chinese renminbi and paid in two instalments, one on December 14 and another on January 15, 2018.
“That’s how cash poor and badly run PDVSA is,” said Russ Dallen of boutique investment bank Caracas Capital, who first made the dispute public. “They are sitting on top of the biggest oil reserves in the world and they can’t even write a cheque for $21.5m dollars.” He said worldwide publicity about the case over the past week had piled shame on PDVSA and the government in Caracas, “and they wanted it to go away as quickly as possible.”
The dispute centred on a $43.5m contract for supply of steel rebar, of which Sinopec said only half had been paid. It accused PDVSA of engaging in “intentional misrepresentations, deceit, and concealment of material facts” involving “wilful deception” and a co-ordinated conspiracy among several of its subsidiaries.
Sinopec, one of the biggest Chinese state oil companies, became involved in Venezuela as part of a package of Chinese loans and investments adding up to more than $62bn between 2007 and 2016. Caracas has struggled to repay its debts as the oil price has fallen from its 2014 peak and as production at PDVSA has dwindled.
Right when you think they can’t be any more criminally self-sabotaging, chavismo proves you wrong…again and again and again.