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Chinese firm sues Caracas oil giant

by COMPILED BY DEMOCRAT-GAZETTE STAFF WIRE REPORTS | December 8, 2017 at 1:56 a.m.

CARACAS, Venezuela -- One of China's biggest state-run conglomerates has sued a Venezuelan counterpart in a U.S. court in a dispute over unpaid bills, a sign of Beijing's growing impatience with its socialist South American ally as it slides into bankruptcy.

In the lawsuit filed Nov. 27 in a Houston federal court, a U.S. subsidiary of Sinopec sought more than $23 million in damages from Venezuela's state-run oil company, Caracas-based PDVSA. Sinopec alleges it never received full payment for 45,000 tons of steel rebar it agreed to sell to PDVSA for $43 million and which was delivered in 2013.

The lawsuit says PDVSA through its U.S. subsidiary Bariven reneged on repeated promises to pay Sinopec, at one point costing the Chinese company $2 million in losses after it entered into arbitration with a supplier it agreed to purchase the steel from to carry out the deal.

"This is not simply a case of a broken promise to pay," Sinopec said in the court documents, accusing PDVSA of "deceit" and "willful deception" in its refusal to pay its bills. "Rather, this case involves a complex commercial transaction specifically calculated to leave Sinopec without a remedy."

The Chinese "usually take a more diplomatic tone" and are clearly angry, Russ Dallen, head of local brokerage Caracas Capital, wrote in a report Wednesday in which he revealed the existence of the lawsuit.

The lawsuit further illustrates how the relationship between the two longtime partners is turning bitter after delays in paying past loans and oil quality issues. It's also evidence that China might not always be there to bail out Venezuela, as it has done over and over in the past decade, Dallen said.

The dispute comes as Venezuela is seeking fresh financing to restructure its huge foreign debt on which it is behind in paying.

China has been one of Venezuela's biggest creditors, providing it loans, cash and investment totaling more than $65 billion between 2007 and 2016, according to a database maintained by Boston University and the Inter-American Dialogue. But it has so far failed to come to President Nicolas Maduro's rescue as he tries to shield the OPEC nation from triple-digit inflation, fast-declining oil production and financial sanctions imposed by President Donald Trump's administration.

A spokesman for Beijing-based Sinopec Group confirmed that a U.S. subsidiary of a Sinopec trading company had filed a lawsuit against PDVSA about "a dispute over payment owed."

"As a big company, it is normal for us to have such commercial dispute and it is normal to resort to law if there is a dispute," Sinopec spokesman Lu Dapeng said by phone.

"Defendants' conduct constituted intentional misrepresentations, deceit, and concealment of material facts known to them, with the intention to deprive Sinopec of the payment it was owed," the court documents show. "In order to coordinate their actions and to ensure that Sinopec did not become aware of their conspiracy to defraud it, defendants had to coordinate with one another on multiple occasions to discuss and plan their course of action."

Geng Shuang, a spokesman of China's Foreign Ministry, said the issue was nothing more than a regular commercial dispute and that China remains willing to cooperate with Venezuela on an equal and mutually beneficial basis.

"I think this is a common commercial dispute and there is no need to make over-interpretations of it," Geng said. "I want to stress that China attaches great importance to the development of China-Venezuela relations."

Information for this article was contributed by Yu Bing and Shanshan Wang of The Associated Press and by Lucia Kassai of Bloomberg News.

Business on 12/08/2017

Print Headline: Chinese firm sues Caracas oil giant

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