Before the US stepped up sanctions on Nicolas Maduro's government, Citigroup struck a deal with Venezuela—and with part of that deal having expired, the bank plans to sell several tons of gold Venezuela had offered as collateral in what Reuters calls a "setback" for Maduro. His government has been using so-called "gold swaps" since 2014, using its gold reserves to get its hands on cash. In the 2015 Citigroup deal, Venezuela took out a $1.6 billion loan, and sources say $1.1 billion of it came due March 11. Since Venezuela has not paid up, the bank plans to sell the gold it had been holding as a guarantee, which reportedly has a market value of around $1.358 billion. The extra $258 million, representing the difference in price between when the gold was acquired and now, will be put in a New York bank account; Bloomberg reports Maduro won't have access.
The gold swaps were started as revenue from oil decreased, making it hard for Venezuela to get hard currency, but over the past two years, as the country's economic situation has worsened and financial sanctions have been imposed by various nations in an attempt to oust Maduro from power, Venezuela has had a hard time getting its collateral back and the country is struggling with shrinking gold reserves. Last month, sources told Bloomberg Citi was in talks with the US Treasury Department about how to handle the matter, and said that Juan Guaido—the opposition leader recognized by most Western nations as Venezuela's legitimate president—was asking Citi not to take possession of the gold. Reuters reports that his team's attempt to negotiate a 120-day extension of the gold repurchase deadline with Citi was unsuccessful, but Bloomberg notes he may eventually be given the extra $258 million. (Read more Venezuela stories.)