Venezuela’s state oil company Petroleum of Venezuela (PDVSA) is facing a lawsuit in the United States for failing to pay $25 million owed to Canadian energy contractor SNC-Lavalin.
The lawsuit, filed on Wednesday in a U.S. District Court in New York, is the latest in a number of legal filings demanding payment from the state-run oil company, which has seen its revenue collapse dramatically in recent years amid falling oil prices and Venezuela’s severe economic crisis.
According to The Financial Times, the action “opens the door to suits for an estimated $2bn or more regarding a string of suppliers with unpaid bills.” PDVSA owes billions of dollars to companies around the world.
“It is now open season on PDVSA,” Russ Dallen, an investment banker at Caracas Capital, told the Times. “This will start an avalanche of legal actions.”
Dallen added that the suit “is the worst possible nightmare for Caracas,” explaining that the Maduro regime had been “doing their utmost not to put PDVSA at risk.”
In a bid to pay off their debts, the Venezuelan government has withdrawn around $475 million from their reserves in the International Monetary Fund, which becomes money deposited in the practically worthless bolivar currency.
“Essentially, Venezuela has borrowed billions from the IMF and is leaving the organization with a bunch of worthless, monopoly money bolívares,” Dallen said.
PDVSA is one of many Venezuelan industries shattered by the country’s ongoing economic crisis. Hundreds of people are now quitting the company every week amid a constant depression of wages.
Last October, socialist dictator Nicolás Maduro appointed Major General Manuel Quevedo as the company’s new director, in a move designed to militarize all aspects of the company’s operations. He also ordered the arrest of dozens of senior PDVSA executives on alleged corruption charges in an attempt to tighten his grip on the industry.
The move only appears to have worsened the company’s predicament. Oil production plummeted to a 30-year low of around 1.5 million barrels a day, compared to the 3.8 million barrels a day in 1999 that was used to finance former president Hugo Chávez’s aggressive government spending.
As noted by Reuters, the company is also “facing rising pressures from an inability to finance exploration and refining operations, contributing to a lack of spare parts for its oil and gas and refining operations.”
Last December, one of China’s largest state-owned companies, Sinopec, also filed a lawsuit against PDVSA, demanding $23.7 million plus interest and damages over their failure to pay half of a $43.5 million order for steel products. It also accused company executives of a “disingenuous nature [and having] feigned promises to make full payment.”