A general appointed at the weekend to run Venezuela's energy sector will name more military officers to senior management posts at state oil company PDVSA as part of a shakeup the government says is aimed at fighting corruption, two company sources told Reuters on Monday.
In a surprise move, unpopular leftist President Nicolas Maduro on Sunday tapped Major General Manuel Quevedo to lead PDVSA and the Oil Ministry, giving the already powerful military control of the OPEC nation's dominant industry.
Besides the corruption scandals, Quevedo will have to tackle an attempted debt restructuring, within the context of a deep recession and debilitating U.S. sanctions.
Sources in the sector said Quevedo's appointment could quicken a white-collar exodus from PDVSA and worsen operational problems at a time when production has already tumbled to near 30-year lows of under 2 million barrels per day.
About 50 officials at state oil company PDVSA have been arrested since August in what the state prosecutor says is a "crusade" against corruption.
Sources within PDVSA and the oil industry said Maduro's administration was using corruption allegations to sideline rivals and deepen its control of the industry, which accounts for over 90 percent of export revenue.
"The order given is to militarize PDVSA in key areas," said a PDVSA employee, asking to remain anonymous because he was not authorized to speak to the media.
A second source said he was told military officials would take over key production divisions in Venezuela's east and west.
Venezuela's president, a former bus driver and union leader whose popularity has plummeted during the economic crisis, has gradually handed the military more power in his cabinet and in key sectors such as mining.
Unlike his popular predecessor Hugo Chavez, Maduro does not hail from the military. The opposition says he has been forced to buy the loyalty of the army, historically a power broker in Venezuela, giving them top posts and juicy business contracts while turning a blind eye to corruption.
PDVSA did not immediately respond to a request for comment, but an internal company message seen by Reuters called on workers to come to Caracas on Tuesday for Quevedo's swearing in.
"Let's all go to Caracas to consolidate the deepening of socialism and the total, absolute transformation of PDVSA," the message read.
Increasing Military Sway
Quevedo, a former housing minister with no known energy experience, is not a heavyweight in Venezuela's political scene, although two sources close to the military told Reuters he was a Maduro ally.
Opposition lawmaker Angel Alvarado predicted the appointment would worsen PDVSA's operations.
"They're getting rid of the old executives, who although socialist and working under catastrophic management, at least knew about oil," he said. "Now we're going to have totally inexperienced hands."
Although military appointees had been on the rise within the oil industry too, Quevedo's appointment is the first time in a decade and a half that a military official has taken the helm of the oil industry.
PDVSA so far had been led by chemist Nelson Martinez and the Oil Ministry by engineer Eulogio Del Pino, both of whom rose in the ranks under previous PDVSA president and Oil Minister Rafael Ramirez.
Later demoted to become Venezuela's representative at the United Nations in New York, Ramirez recently criticized Maduro for not reforming Venezuela's flailing economy, in what insiders say is a power struggle between the two rivals.
Oil Companies Worry
The opposition has also accused Quevedo of violating human rights during the National Guard's handling of anti-Maduro protests, in which stone-throwing hooded youths regularly clashed with tear gas-firing soldiers.
U.S. Senator Marco Rubio included Quevedo on a 2014 list of Venezuelan officials whom he said should be named in U.S. sanctions, although Quevedo does not appear in the list released by the U.S. Treasury Department.
Venezuela's government denies abuses, saying protesters were in fact part of a U.S.-promoted "armed insurrection" designed to sabotage socialism in Latin America.
Quevedo's appointment has worried foreign oil companies in Venezuela, including U.S. major Chevron and Russian state oil giant Rosneft, according to industry sources.
Venezuela is also trying to pull off a complex restructuring of foreign debt, including $60 billion in bonds, about half of which have been issued by PDVSA. Bondholders were invited to Caracas for a meeting with the government two weeks ago, but market sources say there has been no concrete progress or proposals since.
PDVSA said on Friday it was making last-minute payments on two bonds close to default, including one backed by shares in U.S.-based Citgo, a Venezuelan-owned refiner and marketer of oil and petrochemical products, due on Monday, and called for "trust" as it seeks to maintain debt service amid the crisis.
Quevedo's position on the debt issue is not publicly known.