Embattled Venezuelan President Nicolas Maduro, who has consolidated power following a challenge by opposition leader Juan Guaido earlier this year, is seeking to regain control of the economically ravaged country’s most prized foreign asset: Houston-based Citgo Petroleum.

The future of the eighth largest oil refiner in the United States is at stake as directors appointed by Maduro ask a Delaware court to oust the board named by Guaido’s opposition government and return control to them.

Since February, Citgo — the U.S. subsidiary of Venezuela’s national oil company, PDVSA — has been run by the Guaido board, which is backed by the Trump administration.

Both sides were in Delaware Chancery Court on Thursday for oral arguments in a lawsuit filed by the Maduro board in late June.

The legal proxy war over Venezuela’s assets could decide who ultimately leads the refiner that employs 800 people in the Houston area and 3,400 people nationally.

If the case drag on, it could create unwanted uncertainty for Citgo at a time when it is trying to refinance millions of dollars in debt.

Success for the Maduro board could jeopardize U.S. political support for the oil refiner and renew efforts by numerous creditors of Venezuela and PDVSA to seize all or part of Citgo to satisfy their claims. But if the Guaido board succeeds instead, it could help the beleaguered opposition consolidate control of a key $30 billion asset at a time when Guaido is struggling to regain ground in the political fight for Venezuela.

On HoustonChronicle.com: Citgo’s future ensnared in international feud over Venezulea’s debt

For months, Citgo has been caught in the geopolitical crossfire between the Trump administration and the socialist Maduro government. Since the White House recognized Guaido as the legitimate leader of Venezuela in January, it has taken steps to help the opposition leader take control over the U.S. refiner as a way to topple Maduro.

The Venezuelan economy has collapsed under Maduro, turning the once wealthy country into a place where power outages and food, water and medicine shortages are common.

The socialist leader’s recent reelection was marred by fraud and voting irregularities, according to independent observers, and more than 30 governments now support Guaido.

The U.S. has continued to increase pressure on the Maduro regime by expanding and deepening sanctions against Venezuela and PDVSA. The administration also handed Guaido control of Venezuela’s bank accounts in the United States and granted Citgo special exceptions to allow it to keep operating here.

The president of Venezuela has the legal authority to appoint a board of directors for PDVSA, which in turn appoints directors for PDVSA’s U.S. subsidiaries, including Citgo Petroleum. In February, Guaido formally appointed a new board of directors led by the first chairwoman at the company, Luisa Palacios.

The new five-member board proceeded to take over the company, launching a series of meetings at its Houston headquarters to develop a transition plan, signing major refinancing deals, cutting off oil purchases from Venezuela in line with U.S. sanctions and distancing itself from the Maduro regime.

The board also is looking for a new chief executive officer to replace Asdrubal Chavez, the cousin of the Maduro’s mentor, the late socialist leader Hugo Chavez.

Chavez was among the pro-Maduro executives ousted by the Guaido-backed board.

On HoustonChronicle.com: Citgo’s new chairwoman assures industry in wake of Venezulean crisis

In recent months, however, Guaido’s efforts to rally his nation to depose Maduro and persuade the military to end its support largely have failed. At the end of April, an uprising unraveled, sending Guaido and other opposition figures into hiding. Guaido is set to hold talks with the Maduro government in Barbados this week.

In late June, the Citgo board loyal to Maduro challenged the Guaido board’s authority in a lawsuit filed in Delaware, where Citgo Petroleum and related companies Citgo Holdings and PDV Holdings are incorporated.

The Maduro board wants the Delaware court to confirm the validity of its leadership under the state’s corporate law.

Delaware law gives controlling shareholders broad authority to decide who sits on corporate boards and takes management roles. In this case the controlling shareholder of PDVSA and PDV Holding is the president of Venezuela.

But the Guaido-backed board argues that only the U.S. executive branch has the authority to recognize foreign governments. Its attorneys point out that the Trump administration has supported the opposition-backed Citgo board, including extending a license for Citgo to operate within the restrictions of sanctions to ease concerns from customers, investors and other companies doing business with Citgo.

“This complaint is a frivolous effort to use the courts to litigate the foreign policy judgments of the president of the United States, and we are confident that the relief it requests will be denied,” Citgo spokeswoman Katherine Bosley said in a statement.

On HoustonChronicle.com: Citgo execs, arrested by Maduro, forgotten in Venezuela’s turmoil

Historically, U.S. courts have deferred to the executive branch in similar cases, said Russ Dallen, legal and financial analysts with Caracas Capital Markets, a New York-based research analysis firm focused on Venezuelan capital markets. But, Dallen said, the case could hold up Citgo’s efforts to refinance almost $2 billion in debt by creating uncertainty for lenders about the refiner’s leadership.

The uncertainty also could delay “urgently needed hiring” of a new CEO and general auditor, attorneys wrote.

“Corporate paralysis is troubling in and of itself, but in this case, it is particularly problematic because the Citgo Entities face numerous pressing issues,” Guaido’s attorneys added.

Despite the uncertainty, Citgo says its refineries are operating normally and its financial standing is improving. In March, the company secured a $1.2 billion loan backed by 35 financial institutions, spurring financial rating agency Fitch to remove negative watch ratings on the company’s debt.

“Their financial profile has strengthened in the past five months of opposition control,” said Dallen, the analyst with Caracas Capital.

Last year, the refiner earned profits of $851 million and processed 716,000 barrels a day of crude at its three refineries in Texas, Louisiana and Illinois, according to the company.

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