Political risk is often a key consideration for investing in Africa and the Middle East but shareholders of Petsec Energy (ASX: PSA) will be concerned from news that the company has had US $1.68m siphoned out of their bank account and learning that the Houthi rebel group in Yemen are likely to have been involved. 

Petsec has since commenced legal proceedings claiming that the Letter of Credit issued to Arab Bank and Qatar National Bank (QNB) by the Houthi Minister of Oil and Minerals in Sana’a, Ahmed Haris, was illegitimate. 

Following receipt of the Letter of Credit, QNB released US $1.68 million into an account held with Arab Bank with the funds converted to Euros and deposited into an account controlled by Arab Bank, Sana’a. 

The controversy comes at a time when the UN-recognised government of Yemen had expressly forbidden any financial dealing with the rebel Houthis which exert illegitimate control over the Ministry for Oil and Minerals in Sana’a.

Legal proceedings will be filed against Arab Bank, Sydney, Jordan and Sana’a and Qatar National Bank, Doha and Sana’a, to recover the US$1.68 million taken from Petsec’s QNB bank account. 

The loss of funds is expected to have minimal impact on the Company however with management to adjust operational cashflow accordingly. Petsec’s revenue primarily comes from their operations in the United States where they produced 841 barrels of oil for the quarter ending December 31, 2019. 

In the same quarterly report, Petsec reported their Middle East operations had “progressed following successful meetings with the Yemen Minister of Oil & Minerals”.