NEW YORK/HOUSTON: The US involvement in Venezuela's oil sector offers a potential opportunity for international banks, with JPMorgan Chase in an advantageous spot due to its history in the country and past involvement with international trade financing.
A clutch of banks including JPMorgan and Citigroup have historically operated in the country, but reduced operations or pulled out in the last few decades. US banks now, however, may have the potential to compete for opportunities in trade financing or financing investment in oil infrastructure, one source familiar with the situation said. Venezuela is under an interim government after the and analysts stressed there would still be significant challenges to doing business.
Among the banks, JPMorgan could have an edge in the country, where it has had a presence for 60 years. While JPM curtailed its banking and stock trading operation in 2002, it kept a dormant office in Caracas for many years, according to a second source familiar with the matter, adding that it could be reactivated as needed.
"JPMorgan is among the very few US banks with an office in Venezuela, though activity is minimal due to current restrictions", said María Paola Figueroa, Head of Frontier Latin America Research at the Institute of International Finance. "The potential reopening of the oil sector and a broader economic recovery could create meaningful opportunities for foreign banks to re-enter the Venezuelan market, subject to the easing of US financial sanctions".
Venezuela has been under US sanctions since 2006, which were tightened in 2017, prohibiting US financial institutions from providing new money to the government or state oil company, PDVSA.
In 2019, Washington imposed broad sanctions on its oil sector. Now the United States is planning to selectively roll back sanctions on Venezuela as it begins marketing Venezuelan oil. The Department of Energy on Wednesday said that proceeds from oil would settle in US-controlled accounts at global banks. ConocoPhillips CEO Ryan Lance said on Friday at a meeting at the White House that US banks including the Export‑Import Bank, a federal bank which finances projects overseas, may need to be involved in financing Venezuela oil investments.
For JPMorgan, there could be several avenues for involvement. One idea floated within the bank was the possibility of creating a trade bank to finance oil exports, a third source familiar with the matter said, without specifying if official discussions were taking place. The bank, which has a strong presence in oil-producing regions such as the Middle East and Africa, has historical precedence here, as it led the consortium of banks that operated Trade Bank of Iraq, set up in 2003 after the US-led invasion.
JPMorgan could also use funds from its Security and Resiliency Initiative, a $1.5 trillion 10-year plan it unveiled last year to finance areas such as critical minerals, where Venezuela has deep resources, the second source familiar with the matter said.
"JPMorgan is the best in class global bank", said Mike Mayo, banking analyst at Wells Fargo. "So if there are more opportunities globally or in Venezuela, the best in class global bank should get a fair share of this".
Currently, the bank trades Venezuelan sovereign bonds that are not under sanctions with offshore counterparties, the source said. — Reuters
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