MercoPress. South Atlantic News Agency

Venezuelan oil company begins operations with China’s Citic Bank

PDVSA told buyers payments can still be made in dollars or Euros, but every transfer must go to China Citic Bank and use Deutsche Bank as intermediary.

Venezuela’s state-run oil company PDVSA has started using China Citic Bank to collect money from crude and fuel sales instead of Portugal’s Banco Espirito Santo, according to media reports in Caracas.

 PDVSA told buyers this week that payments can still be made in dollars or Euros, but every transfer must go to China Citic Bank and use Deutsche Bank as intermediary.

Previously, payments to PDVSA from sales made on the open market and through supply contracts were deposited at its accounts with Banco Espirito Santo, which Portugal said this month it would rescue because of financial woes.

“If there is any outstanding balance due to PDVSA, please ... make your payment according to [these new] instructions,” said the letter, sent to trading companies and clients.

Venezuela has been trying to boost exports of crude and products to China to 1 million barrels per day (bpd), part of broader oil-for-loan deals that have allowed the country to receive more than 40 billion dollars in credits since 2007.

The China Development Bank (CDB) also holds some Venezuelan money through accounts created by both countries to pay debt service.

One trader said the change could make it more difficult to obtain letters of credit that PDVSA requires buyers to have to guarantee payment for purchases.

“To use a Chinese bank instead of a European bank can bring complications,” said a trader close to PDVSA’s sales.

PDVSA reported sales of some 114 billion dollars in 2013, mostly from exports of crude oil and refined products. The money is received in hard currency at its accounts and a portion of it is later sold to Venezuela’s central bank to manage a currency exchange control program adopted in 2003.