Citibank has reversed course. Despite an earlier announcement that it would stop being the transfer pay agent for Venezuela's state-owned oil company, Petroleos de Venezuela (PDVSA), it will continue to do so--for the time being.
The continuation of its role as pay agent may be because of contract issues.
Indications are that Citibank is contractually obligated to maintain its position until a new pay agent has been found to replace it. No replacement is likely given U.S. government pressure on banks to stop dealing with PDVSA because it is identified as a possible money launderer.
If Citi cut off services to PDVSA, it would potentially be liable for billions in damages. Thus, Citi is likely to now just run out its contract, which runs until April 2017.
As previously reported, if PDVSA is not able to maintain a pay agent relationship with a major global bank, the oil firm would likely have trouble gaining short-term oil production financing which would result in less oil production and a further decline in state revenues for a country that is on the brink of collapse anyway.
An unnamed Portuguese financial institution will take over as the paying agent for Petroleos de Venezuela, El Nacional is now reporting.