Venezuela Sanctions

On January 28th, OFAC designated Petroleos de Venezuela S.A., which is Venezuela’s national oil and natural gas company. The PdVSA, as it is known, was placed on OFAC’s Specially Designated Nationals and Blocked Persons List, or the SDN List, pursuant to E.O. 13850. This means that US persons are generally prohibited from engaging in transactions with or involving PdVSA or any party or entity owned 50% or more by an SDN.

If you need legal advice about your business transactions, consider consulting with an experienced OFAC attorney. A lawyer could help you conduct your business in a way that complies with OFAC sanctions.

• BANDES Sanctions

Reasons for the New Sanctions

At the moment, there is an ongoing constitutional crisis in Venezuela involving Maduro and the parliament speaker, Juan Guaido, who declared that he was president some time ago. This conflict has resulted in the US government enforcing and providing a much stricter sanctions regime on Venezuela to ease the way for the ousting of Maduro and to give way to Juan Guaido’s new government.

The sanctions regime is called sectoral sanctions. Its purpose is to control and restrict the Venezuelan government’s source of funding by way of their oil companies and sector. Although major US businesses, like CITGO, Chevron, and Halliburton, have very deep entanglements with the Venezuelan oil companies, the law has to be drafted and constructed in a way that legally does not permit most persons or entities to deal with PdVSA. However, certain exemptions are put in place so that the wind-down of certain activities is permitted, and there is not a drastic detrimental effect on certain businesses based in the US.

New OFAC General Licenses

US persons are required to freeze any property or interest in property of an SDN like PdVSA or of any entity owned 50% or more by an SDN that comes into the US person’s possession or control. However, OFAC also provided new general licenses at the same time as the PdVSA designation.

General License 7

General License 7 authorizes certain transactions with PDV Holding and CITGO Holding until July 27th, 2019.

General License 8

General License 8 permits Chevron, Halliburton, Schlumberger, Baker Hughes, and Weatherford International to engage in certain dealings otherwise prohibited by the PdVSA designation until July 27th, 2019

General License 9

General License 9 authorizes certain transactions and activities related to the pre-sanctioned debt of PdVSA entities, so long as a divestment or a transfer of the debt is to a non-US person.

General License 10

General License 10 provides that US persons in Venezuela are authorized to purchase refined petroleum products from PdVSA and entities owned by PdVSA, provided that they are for personal, commercial, or humanitarian use and not for resale, transfer, exploitation, or re-exploitation.

General License 11

General License 11 allows for the maintenance and wind-down until March 29th, 2019 of agreements, contracts, and activities with PdVSA entities that were in effect prior to the designation on January 28th, 2019.

General License 12

General License 12 authorizes transactions ordinarily incident and necessary to purchasing and importing into the US petroleum products and petroleum from PdVSA entities until April 28th, 2019, with certain conditions and limitations, including that payments by blocked persons must be made into blocked accounts.

General License 12 also authorizes transactions ordinarily incident to winding down contracts with PdVSA entities that were in effect before January 28th, 2019. This includes importing of certain goods, services or technologies with certain conditions and limitations. In this case, payments must be made into blocked accounts.

General License 13

General License 13 authorizes transactions with Nynas AB or its subsidiaries until July 27th, 2019.

General License 14

General License 14 authorizes the official business of the US government by employees, grantees, or contractors. President Trump also issued an Executive Order on January 25th, 2019 that amended the definition of the government of Venezuela to include persons who have acted or purported to act on behalf of the government of Venezuela, including members of the government of Maduro.

How an OFAC Attorney Could Help Businesses

An OFAC sanctions attorney could help a business that has dealings with any Venezuelan entity or is involved in the Venezuelan oil and gas sector to understand its legal obligations under US sanctions law. A knowledgeable lawyer could review and interpret the law to determine a business’ options with regards to its business activities and the recent general licenses. Call today to discuss your situation.