Citgo Might Go Belly Up, and Russia Will Pick Up the Slack

By Motley Fool Staff Markets Fool.com

In this clip from Industry Focus: Energy, Motley Fool analysts Sean O'Reilly and Taylor Muckerman explain how Russia might end up taking over one of the biggest petroleum refiners in the United States.

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A full transcript follows the video.

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This video was recorded on April 13, 2017.

Sean O'Reilly:Last night,Taylor, you sent me a really cool article about Russia, not about ourgovernment --

Taylor Muckerman:Yeah,not about government ties.

O'Reilly:-- not aboutanything going on in the world. But, they'retrying to take over my local gas station. Whatgoing on here? That's not cool.

Muckerman:Youmight have heard ofCitgo Petroleum, one of the top 10petroleum refiners in the United States.

O'Reilly:They'reactually owned by Venezuela.

Muckerman:Yes,they are owned by Venezuela.

O'Reilly:Or,we should say, state run.

Muckerman:What is it,PDVSA? The state-owned oil company down there. Unfortunately for them, they'renot doing so well because of oil prices --

O'Reilly:Which wereall connected by the circle of life, you'llremember that Venezuela was one of the countries begging OPEC to cutproduction, like, "We need higher oil prices, we're bleeding money!"

Muckerman:So they're close todefaulting on some debt that Russia owns. And as a condition of that loan, they can take over PDVSA's stake in Citgo Petroleum.

O'Reilly:Thisfeels like Chapter 11, but on an international scale.I didn't know that was how it works.

Muckerman:Rosneft, notRussia the country, but Rosneft, which has close ties to the government -- we'renot going to get into that -- but they pledged a 49.9% stake inthe company if theydefaulted, as their collateral. So it's not a majority stake, but it's darn near close.

O'Reilly:Plus, it's Putin.

Muckerman:It'sclose enough. CEO Igor Sechin, has long beenconsidered Putin's right-hand man. So, aninteresting little tidbit.Still waters run deep in the oil industry.

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