Kathleen Hamann Quoted in Agenda: Poison or Promise – Boards Face Tough Risks on Venezuela’s Reserves

Following the abrupt removal of Venezuela’s president in a U.S.-backed operation, the Trump administration indicated that the United States would temporarily oversee the country and that American oil companies would invest heavily to rehabilitate Venezuela’s deteriorated energy infrastructure.

Any reopening of Venezuela’s oil sector, however, would occur amid weak global prices, oversupply, ongoing sanctions fallout, and significant security risks. Companies weighing a return would also confront uncertainty over political authority and legal exposure tied to PDVSA, the state oil company implicated in numerous corruption investigations.

Corporate boards are therefore advised to conduct heightened diligence, including reviewing past involvement in the region, ensuring experienced leadership in politically sensitive negotiations, and assessing risks to personnel and operations before pursuing new activity in Venezuela.

Pierce Atwood white collar litigation partner and former State Department official Kathleen Hamann stated, "In any situation when you're going from comprehensive sanctions to [something] potentially much more open, especially when that's predicated on some form of regime change, you always have to sort of hedge your bets against [the possibility that] whatever change precipitated the reduction in sanctions doesn't hold.”

Kate went on to say, “We're in a situation now where you've got the U.S. government saying one thing. You've got the Venezuelan government saying another ... you don't have reliable governance. The sanctions risk is reduced, but now there are all kinds of other risks. Are you potentially attempting to open up business in what might become a war zone? What if there's domestic conflict between those who support the opposition and those who support the vice president?"

When evaluating the risks of operating in Venezuela, board members should rigorously question management about the company’s relationships with each potential political authority—whether that involves a form of U.S. oversight, a continuation of the Maduro government, or leadership by the current opposition. “The last question you have to ask is, if we have to get out, how fast can we get out? That’s not a small undertaking,” Kate added. 

Kate went on to say, “There's a kind of lawlessness that accompanies these situations where I think companies have to be very, very careful. The chances that they're going to get bribe demands are significantly higher right now. Amid political disarray, there's often an increase in criminal activity as more people assume they're less likely to get caught.

"The future of PDVSA is ambiguous right now and likely to be the epicenter of the tug-of-war over who is running the country," said Hamann. "Of course, one of the greatest challenges right now is whether any decisions by PDVSA - bribe-induced or otherwise - will ultimately be respected by whoever ends up in charge."

The full article appears on agendanews.com, which is a specialized news service from the Financial Times.