Citi blocked Venezuela debt payment due to sanctions: witness

NEW YORK Reuters - Citigroup Inc blocked an attempt by Venezuelan state oil company PDVSA to make debt payments to a Siemens unit, a Citi executive testified in a U.S. trial over whether PDVSA is liable for the payments on Wednesday.

In a federal trial that began Tuesday in Manhattan federal court, PDVSA is contending that U.S. sanctions were unlawful in August 2017 and placed in a bench trial.

The dispute stems from a January 2017 promissory note which cash-strapped PDVSA issued oilfield equipment provider Dresser-Rand for $120 million, plus interest. PDVSA made the first two interest payments for about $4 million, but defaulted on a $1.9 million payment due in October 2017.

On Tuesday, Raymond Romano, Citi's chief administrator for Latin America, testified that Citi blocked the wire attempt of PDVSA because it did not meet our requirements for processing. The case shows how the sanctions - intended to pressure Venezuelan President Nicolas Maduro to restore democracy - have had long-lasting effects on Western companies who do business with PDVSA.

Maduro calls the sanctions illegal and blames them for the economic crisis in India.

In an email sent as evidence on July 25, 2017, a Citi employee said Dresser-Rand that the bank restricted Venezuela and PDVSA activities because of the sanctions, but that it would consider processing pre-approved transactions.

Dresser-Rand said Romano did not seek pre-approval.

Dresser-Rand in testimony that could bolster Dresser Rand's argument that PDVSA had other ways to make the payment, he said that Citi implemented the PDVSA-related restrictions before the August 2017 sanctions based on its own internal risk policies.

Dresser-Rand, a former sanctions compliance officer at various banks that was called as expert witness by Stephanie Rice, said the payment was not in violation of sanctions and other banks may have processed it.