A federal judge in Manhattan on Wednesday confirmed the freezing of $300 million in cash held by Venezuela's state-run oil company, finding it probable that Exxon Mobil Corp. will win its legal battle against the company.
Exxon Mobil is challenging Petroleos de Venezuela SA, or PDVSA, over compensation for the nationalization of one of four heavy oil projects in the Orinoco River basin, one of the world's richest oil deposits.
Irving, Texas-based Exxon Mobil, the world's largest publicly traded oil company, is seeking to freeze billions in Venezuelan assets in the United States and Europe to guarantee a payoff in the event it wins a decision by an international arbitration panel.
U.S. District Judge Deborah A. Batts on Wednesday confirmed the "order of attachment" on the $300 million in Venezuelan cash after listening to arguments from lawyers for both oil companies.
A British court issued an injunction last month temporarily freezing up to $12 billion of PDVSA's assets.
Venezuelan President Hugo Chavez rattled international oil markets this week by threatening to cut off all oil supplies to the United States in response Exxon Mobil's legal challenges. On Tuesday, PDVSA said it would stop selling oil to Exxon Mobil, although it was not clear how much crude that would affect.
Venezuelan Oil Minister Rafael Ramirez, who also heads PDVSA, on Wednesday vowed to mount "a defense of the nation's interests" in the battle with Exxon Mobil.
U.S. State Department spokesman Sean McCormack, meanwhile, said the United States supports the U.S. oil company's efforts to seize assets to get a "just and fair compensation."
Venezuela did not immediately respond to the judge's decision in New York.
But Foreign Minister Nicolas Maduro said in Caracas that the U.S. State Department's expression of support for the company "makes things clearer: behind Exxon Mobil's maneuver is the United States government."
"It's not a commercial dispute. It's a political dispute between a government exercising its sovereignty ... and the government of the United States," Maduro told reporters.
The $12 billion British court order was mentioned frequently during Wednesday's arguments.
PDVSA lawyer Joseph Pizzurro said the $12 billion demand by Exxon Mobil was so inflated that PDVSA's representatives told the company it was ridiculous.
"There's such a huge dispute between what Exxon Mobil says it is owed and a reasonable valuation," Pizzurro said.
He said the U.S. oil company originally demanded $5 billion in private negotiations with PDVSA but asked for $12 billion in court.
He said the dispute should be settled in arbitration proceedings.
Steven K. Davidson, a lawyer for Exxon Mobil, told the judge it was inappropriate to reveal the $5 billion that was mentioned during negotiations.
Davidson told Batts it was necessary to freeze the assets because PDVSA was "likely to dissipate its assets, which is one of the reasons for the award in London."
Pizzurro said PDVSA has $80 billion to $90 billion assets worldwide that would be available for any award in a U.S. court.