Venezuela’s state-controlled oil company can’t use US sanctions as an excuse for not paying what it owes on $348 million in defaulted debt, a federal appeals court in New York ruled. 

A three-judge panel of the court in Manhattan Wednesday upheld lower court rulings that Petroleos de Venezuela SA had to make good on a set of promissory notes. The ruling is a win for the debt holders, Houston-based Dresser-Rand Co., a unit of Siemens AG, and Contrarian Capital Management.

PDVSA had argued that payment was made impossible by the sanctions against the government of Venezuelan President Nicolas Maduro, which the Trump administration began imposing in 2017 to pressure Maduro to step down. 

The sanctions restricted Venezuela from exporting oil and from engaging in business and financial transactions in the U.S. 

Separately, PDVSA officials are bracing for the upcoming auction of Citgo Petroleum Corp., Venezuela’s main foreign asset, to satisfy claims tied to the country’s nationalization of foreign business interests more than a decade ago. The parent of the US-based refiner is a PDVSA unit. 

A US judge ordered the shares of Citgo’s parent put up for sale to pay off at least $5 billion in judgments over foreign-owned mining, oil and agricultural assets by former President Hugo Chavez. But some of Venezuela’s creditors accuse PDVSA and Citgo’s parent of seeking to delay or scuttle the auction over the loss of the parent’s official stock certificates. 

The parent is refusing to issue replacement certificates unless PDVSA puts up a $40 billion bond to to cover the unit’s potential liability. Whoever owns the parent’s shares owns Citgo. PDVSA officials say US sanctions bar them from putting up such a bond.

The case are: Red Tree Investments LLC v. Petroleos de Venezuela SA, 22-225, 22-232; Siemens Energy Inc. v. Petroleos de Venezuela SA, 22-47; Second US Circuit Court of Appeals (Manhattan).

--With assistance from Jef Feeley.