A U.S. subsidiary of state-owned China Petroleum & Chemical Corp., or Sinopec, is suing PDVSA, the Venezuelan state oil company, in a U.S. court, the Financial Times reported Dec. 7.
Sinopec's U.S. subsidiary is suing PDVSA for $23.7 million plus punitive damages over a May 2012 contract to supply steel rebar for $43.5 million. Court documents reveal that half of the bill remains unpaid, said the FT.
Sinopec in September 2013 agreed to invest $14 billion in a Venezuelan oilfield as part of a package of Chinese investments and loans worth more than $62 billion to Venezuela between 2007 and 2016, the FT said, citing the China-Latin America Finance Database of the Inter-American Dialogue, a think tank.
As oil prices fell and production at PDVSA dropped, Venezuela's debts mounted.
Beijing agreed in 2016 to renegotiate its loans to Venezuela to keep up payments to bondholders. The latter kept up its repayments in the form of oil but still failed to comply.
PDVSA's financial statements revealed Venezuela shipped 505,000 barrels of oil a day to China worth $5.8 billion in 2016, a drop from $8.3 billion in 2015 and $14.4 billion in 2014.
Sinopec now accuses PDVSA of using "an undercapitalized shell with the sole purpose of preventing Sinopec from having a remedy" whereby its behavior "constituted intentional misrepresentations, deceit, and concealment of material facts."
Russia is now the only external creditor willing to support Venezuela, said the FT. In November, Russia agreed to restructure $3.15 billion of Venezuela's debt.
Sinopec's lawyers declined to comment and PDVSA could not be reached, said the FT.