Mali frees Resolute executives after $160 million deal, AFP reports
The three executives, including CEO Terry Holohan, were freed from detention on Wednesday.
Venezuela’s Central Bank logo and coin, via Wikimedia Commons.
“Beggars can’t be choosers,” goes the saying, and it seems to be the best way to explain Venezuela’s recent move to turn to U.S.-based financial icon Citigroup for some cash, as the country reels from a sharp decline in oil revenue.
Last week, local newspaper El Nacional reported (in Spanish) that President Nicolas Maduro’s socialist government had signed a complex deal with Citibank — owned by Citigroup — to swap $1 billion in cash for about 1.4 million ounces of the country’s gold reserves.
While the details of the deal are unclear, El Nacional did say that Venezuela would have to pay interest on the funds.
On the flip side, the agreement should provide the cash strapped nation much needed foreign currency to afford some basic items it is currently lacking of, such as medicine, food and even toilet paper, just to mention a few.
Blackmarket soap for sale at over five times the government regulated prices, east Caracas. (Image courtesy of Annalie Ibarra, Venezuelan in Chile)
Venezuela has the world’s largest estimated oil reserves, which it has used to position itself as a foil to American “imperialism.” The state received 95% of its export earnings from petroleum before prices fell, but it is now struggling to cover its own needs and support a foreign policy rooted in oil-financed largess, including shipments of reduced-price petroleum to Cuba and elsewhere.
In terms of gold, the nation holds almost 368 tonnes, which makes it the world’s 16th-biggest gold reserves, according to the latest figures provided by the World Gold Council.
The recent drop in oil prices has not only affected Venezuela, but it has sent tremors through the global political and economic order, setting off an abrupt shift in fortunes that has bolstered U.S. interests. As a result, some top oil-exporting nations — particularly those hostile to the West, including Russia and Iran— are on the verge of a major financial crisis.
7 Comments
Reed Marx
I find it VERY suspicious that a nation who is targeted by U.S imperialism coughs up a key asset to Citi (an American arm of that despised imperialism). Why wouldn’t you just sell your hard asset to the gold hungry Chinese who have nearly 900 billion U.S.Ds to buy all the gold they want? Me thinks this might be part of an evolving American coup or protection money paid to hold off the “U.S backed interests” from taking back Venezuela. Now the question is What will Citibank do with that gold? Short the market to buy more at 1K an ounce? We will see soon enough.
Altaf
The article says ‘details are unclear’. El nacional says ‘Venezuela will pay interest. What I make out is Venezuela and Citibank entered into an agreement to borrow a billion. As a mortgage Venezuela kept gold with the bank.
May be they just wanted to borrow some cash for short term, that’s the reason they did not approach Chinese.
Chance Pemberton
Valenzuela appears to be betting that oil will rebound and probably structured the loan accordingly. Citi is sitting good having most likely set a high interest rate with no risk since they are covered with holding gold just in case they default.
Andy
Venezuela was having severe economic turmoil prior to the reduction in oil prices. When Chavez died, things started on a speedy decline. Due to the timing of the events, the low prices is a separate issue and toilet paper was a rare commodity already.
David_R59
I calculate that they’ll able to do this about five more times before they run out of gold. (1.4 million oz = 58.33 tons)
Then what?
Richard S
A more interesting question would be to ask where was the gold physically located? I recall that Venezuela made a big fuss a couple of years ago about repatriating all of its gold back from Europe. If so, this means that they will have to fly stuff back out of the country again – which takes time and costs money. If they hadn’t done this, it would have been a very simple exercise (of wheeling the gold bars from one cage to another in the same Swiss or German bank) to sell the gold. This is THE reason why countries keep much of their gold reserves offshore.
Art Easian
Want to bet they do not buy medicine or toilet paper?