New Jersey Senator Robert Menendez is expressing concern that the potential purchase of Citgo assets from Venezuela by Russia’s Rosneft could represent “threats posed to our national security, economy and energy independence.” Currently, Rosneft, a Russian owned oil company, holds 49.9% ownership in Citgo as security for a loan made last year to Venezuela. Menendez and several other members of Congress have written to the Treasury Secretary expressing concern about the prospect of Rosneft gaining control of Citgo.
Given Russia’s meddling in last year’s election and what could involve broader use of cyber warfare to be politically disruptive, a higher level of concern is justifiable. Instead of jumping into the competition for news coverage, it would be more reassuring if those members of Congress first gathered facts and analyzed them.
Citgo has had a substantial presence in the US for decades. Its gasoline is sold through about 6,500 independent outlets in 28 US states and Citgo Petroleum owns oil refineries in Illinois, Louisiana, and Texas. While that would represent a substantial Russian investment and footprint in the US, it would not be the only one. Since 2000, Lukoil, one of the 20 largest oil companies in the world, has been selling petroleum products in 11 east coast states and the District of Columbia.
While adding Citgo to its US portfolio would allow Russia to engage in serious disruptive mischief, the question is would it? Probably not. Putin and his oligarch cronies, who have enriched themselves by plundering Russia’s resources, have moved their wealth overseas to protect it and see it grow. Putting a large investment such as Citgo at risk would not be in their self interest. Any action to disrupt our energy market could be countered in a number of ways and not just including freezing their assets.
Oil is fungible, so any effort to manipulate the flow to Citgo refineries could be offset after initial disruption. When refineries go down, except in California, others move quickly to make up the shortfall. Any action that constrained product sales would just expand competitors market opportunities without a long term effect on price. That is how competitive markets work.
Foreign investment can contribute to a more productive relationship between the US and Russia, which is sorely needed.
Congressional due diligence is appropriate; ill informed fear mongering isn’t.