Venezuela-US oil deal risks violating local law, say experts

{"text":[[{"start":11.74,"text":"The oil deal between Caracas and Washington risks violating Venezuelan law, according to experts and politicians, raising fresh questions over the sustainability of the agreement."}],[{"start":22.92,"text":"Henrique Capriles, a leading member of the political opposition within Venezuela, said there were a host of “legal and constitutional problems” with the deal, under which the Pentagon is due to take a 35 per cent stake in a Venezuelan oil company that has been awarded the rights to one-fifth of the country’s reserves."}],[{"start":39.92,"text":"Capriles said Donald Trump’s claim that the deal involved a 100-year concession would violate the Venezuelan constitution, given the length of the contract."}],[{"start":49.28,"text":"Acting president Delcy Rodríguez has contradicted the White House claim, saying any licences would only be valid for 25 years."}],[{"start":57.12,"text":"Capriles said: “Why was there no tender process, no public auction, before handing over no less than 65bn barrels of oil to a handpicked but absolutely unknown company? That raises a constitutional problem, a legal problem.”"}],[{"start":null,"text":"

"}],[{"start":71.28,"text":"David Goldwyn and Andrea Clabough at the Atlantic Council in Washington said the idea of a 100-year concession “appears to stretch the limits of what is allowable” within the constitution."}],[{"start":81.28,"text":"They said that “dozens of similar questions” have “the same likely outcome that [they will be] subject to legal challenge by parties ranging from any existing contract holders to Venezuelan citizens and, of course, subject to challenge by a future Venezuelan government.”"}],[{"start":96.52,"text":"Politicians and experts have cited other ways in which the deal may breach Venezuelan law — although they cautioned that the only publicly available information is a brief White House factsheet, rather than a formal contract."}],[{"start":108.72,"text":"“There is no way this does not get challenged in court, either in the US or eventually in Venezuela when there is an election,” said a Venezuelan oil executive."}],[{"start":115.32,"text":"According to information published so far, there is no role in the deal for the state-owned oil company Petróleos de Venezuela (PDVSA). However, José Ignacio Hernández, a Venezuelan legal expert now living in the US, said the constitution states that PDVSA “has the mandate to control the oil industry” — a position that was not altered by a hydrocarbons law passed after the US captured former president Nicolás Maduro in January."}],[{"start":null,"text":""}],[{"start":142.28,"text":"“Private investors cannot directly hold oil rights because they must act as contractors” for PDVSA and its subsidiaries or enter into a joint venture with the company, he said."}],[{"start":152.48,"text":"The deal announced last weekend by the White House awards North American Blue Energy Partners, a company controlled by Venezuelan businessman Alejandro Betancourt, control of more than 17 oilfields that it can develop or licence to others. The Trump administration hopes it will help accelerate investment in the country’s oil sector."}],[{"start":170.8,"text":"Potential investors in the 17 oilfields will be watching closely to see how legally and politically sustainable the deal is, especially if there are new elections in Venezuela that usher in an opposition-led government."}],[{"start":183.24,"text":"Elías Matta, a former president of the national assembly’s oil and energy commission, defended the agreement, saying the constitution and the recent law “allow the entry of private capital and the participation of private companies” in the oil sector. He added: “The important thing is that they start to produce.”"}],[{"start":200.48,"text":"One of the most contentious parts of the deal is the provision that the US will be able to buy at cost 20 per cent of the oil that results from the agreement. Given there would be no profit on such sales, the producers would not pay any tax in Venezuela."}],[{"start":213.96,"text":"“Would Exxon or Conoco or Chevron have given up the 20 per cent? I doubt it,” said Capriles, a lawmaker who leads an opposition faction inside Venezuela. For a Venezuelan company to do that was “if you can excuse my language, completely stupid”, he said. He added: “The republic loses 20 per cent of that oil.”"}],[{"start":232.26,"text":"The Venezuelan government did not respond to a request for comment."}],[{"start":235.84,"text":"The agreement with NABEP has also raised legal questions in the US, particularly over the role of the Pentagon’s Office of Strategic Capital."}],[{"start":243.4,"text":"Sean Parnell, Pentagon spokesperson, told the FT that the OSC does not have the statutory authority to take equity stakes in private companies — its role is limited to providing loans, guarantees and other assistance."}],[{"start":258.12,"text":"However, the White House’s factsheet said NABEP granted OSC a 35 per cent equity stake in its corporate parent."}],[{"start":266.4,"text":"Peter Harrell, an attorney and former White House senior director for international economics, said the US government has not released enough details to know whether the equity stake is legal or not."}],[{"start":276.92,"text":"“They’ve not fully explained their legal story,” he said."}],[{"start":280.48,"text":"One possible theory, he said, is that the OSC’s authority to make loans and loan guarantees would allow it to receive warrants that can be converted into equity as collateral."}],[{"start":291.04,"text":"Another is that the government may be leaning on a statute that allows it to enter into contracts and grants to expand the defence industrial base — though no president before Trump has interpreted the law to authorise equity investments."}],[{"start":304,"text":"“It [the confused messaging] illustrates the fact they might not have a fully developed legal theory for all of this,” Harrell said. It was unclear whether anyone would have legal standing to challenge the deal, he added."}],[{"start":316.36,"text":"Asked whether it was legal for the Pentagon to take equity stakes in companies, a senior US official said: “All financial positions granted to OSC are consistent with the statute.”"}],[{"start":327.12,"text":"Tad DeHaven, a policy analyst on economic issues for the Cato Institute, said Trump’s agreements to take equity stakes in private companies have been “opaque” and left experts trying to parse what the administration’s legal case would be “if they actually made it”."}],[{"start":341.8,"text":"“It’s an administration doing what it wants and basically saying, ‘somebody try and stop us’,” he said."}],[{"start":347.4,"text":"Additional reporting by Ana Rodríguez Brazón in Caracas"}],[{"start":355.98,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1788764195_3295.mp3"}