Venezuela is exploring a plan to repay its mounting debt of over $20bn to bondholders and creditors by diverting 200,000 barrels of crude oil per day to a trustee who would then distribute the proceeds to the creditors. The proposal comes as these creditors are seeking to seize Venezuelan assets abroad in U.S. courts due to the country's default on payments.
The defaulted debt exceeds the value of Venezuela's foreign assets, including Citgo, its prized possession in the United States. To prevent the potential breakup of Citgo, Venezuela is considering the redirection of crude oil exports from China to the United States. Currently, the oil being sold to China carries a discount of around $20 per barrel.
While diverting 200,000 barrels per day would be a significant loss for Venezuela, which desperately needs the revenue, recouping the discount by selling the oil to the United States could help pay off the debt. However, any proceeds generated from this arrangement would be strictly allocated to debt repayment and would not contribute to other revenue-generating activities in the country.
The proposed plan still requires approval from both the regime of president Nicolas Maduro and the U.S. government. In January, Washington granted Chevron a license to transport 134,000 barrels per day of Venezuelan crude oil to the US Gulf Coast.
Despite its financial challenges, Venezuela has seen an increase in its crude oil and refined product exports. The latest available data for June indicated that the country exported a total of 715,000 barrels per day, representing growth compared to the same period last year.
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