Venezuela stands on the brink of losing one of its most prized assets, Citgo Petroleum Corporation, following a protracted legal battle in the United States grounded in the country's tumultuous economic and political history.

Citgo, the US’ seventh largest refiner and a cornerstone of Venezuela's oil industry acquired by the state in 1990, has become a focal point in a complex web of litigation and geopolitical manoeuvring. Valued at $13bn, the company's fate now hangs in the balance as US courts move forward with auctioning its shares to satisfy creditors' claims totalling $21.3bn.

The Houston-based refiner, legally owned by Venezuelan state-owned energy company PDVSA but controlled by a holding overseen by the country's opposition since 2019, operates an extensive refining network, 38 terminals and six pipelines, and supplies 4,200 independent retailers, boasting a refining capacity of 807,000 barrels per day (bpd). Recent financial reports indicate robust earnings totalling $5.26bn over the past nine quarters.

The genesis of this long-running legal saga dates back to Hugo Chávez's presidency, marked by a wave of nationalisations that soured Venezuela's relations with international investors since the early 2000s. In 2017, Venezuela defaulted on its debt, further compounding the situation. Among the most aggrieved parties is Crystallex, a Canadian mining firm that won authorisation in 2019 to seize Citgo as compensation for unpaid debts, stemming from the expropriation of its assets.

Other claimants seeking a portion of the sale proceeds are Siemens AG, ConocoPhillips and ExxonMobil Corp., with Conoco alleging debts exceeding $1.2bn over the seized assets.

The recent court proceedings, overseen by federal district judge Leonard Stark in Delaware, have intensified Venezuela's predicament as the auction draws closer, with the deadline for second bidding offers expiring last week. Despite impassioned pleas from Venezuelan authorities, including Pedro Tellechea, Oil Minister and president of PDVSA, which technically still owns Citgo, the auctions have proceeded unabated. Tellechea lambasted the proceedings as an affront to Venezuelan sovereignty, warning of the sale's huge impact on the nation's economic stability.

Several investor groups have submitted binding bids in the ongoing auction of shares in Citgo's parent company. According to sources close to the matter cited by Reuters, at least five groups are involved, with three securing financing commitments from major banks such as JPMorgan and Morgan Stanley, alongside advisors like Rothschild & Co and Elliott Investment Management.

While some bidders aim for all-cash offers, others are leveraging credit bids and cash to bolster their proposals. The court has permitted creditors to utilise their entire claims as part of their bidding strategies, including claims from entities like Miner Gold Reserve and Rusoro Mining.

The US Treasury has been shielding Citgo from creditors since 2019, but it may give the go-ahead if the auction is approved.

Analysts believe that losing Citgo could further devastate Venezuela's already beleaguered economy, aggravating the hardships endured by its citizens.

Meanwhile, in Caracas the official narrative frames Citgo's potential loss as an act of "imperialist dispossession," laying blame squarely on the United States and political adversaries within Venezuela itself.

“We strongly reject the theft of Citgo instrumentalised by the US government, Leopoldo Lopez, Juan Guaido, Julio Borges, and the neo-fascist oligarchy,” Venezuelan Vice President Delcy Rodriguez said on June 17.

“Venezuela will not recognise any type of fraudulent transaction. Through a great national union, the Venezuelan people will defend their heritage and will apply implacable justice to those who plotted this plunder against the Republic,” she added.

The legal complexities extend beyond financial restitution, touching on Venezuela's fraught internal politics. The interim government led by Juan Guaidó, recognised by the United States and other Western powers since 2018, also becomes entangled in the affair. Allegations of gross mismanagement and unauthorised use of Citgo's assets during Guaidó's tenure have added layers of controversy, further clouding the legal waters surrounding the company's ownership.

As the auction proceeds under the auspices of US jurisdiction, the future ownership of Citgo remains uncertain, with potential bidders assessing the strategic value of acquiring a company deeply entangled in geopolitical and legal quagmires. For Venezuelans, the stakes are existential, as the loss of Citgo would not only diminish their nation's economic leverage but also underscore the enduring repercussions of years of erratic governance and international isolation.

In this high-stakes legal drama, Venezuela finds itself at a crossroads, grappling with the legacy of nationalisation, sovereign debt default, and the complex dynamics of global financial markets. Its outcome will resonate far beyond the walls of Delaware, shaping Venezuela's future as the country heads to the polls next month in a pivotal election that could spell the end of the Bolivarian era.