Understanding the Latest Updates on U.S. sanctions Against Venezuela
- Arne Mielken
- Nov 27, 2023
- 7 min read
What must businesses know about the new OFAC general licences and eased sanctions on Venezuela?
The United States government use both newly issued and modified OFAC general licences to provide a restricted easing of sanctions on Venezuela. What does all this mean for U.S. and non-U.S. businesses?
Latest Update
OFAC issued new Venezuela FAQs
24 November 2023
OFAC has issued 4 FAQs on its Venezuela sanctions:
Yes.
For the purposes of Venezuela GL 45A, “non-commercial” flights mean not-for-profit flights that are not intended to generate a profit for Consorcio Venezolano de Industrias Aeronáuticas y Servicios Aéreos, S.A. (Conviasa), or any entity in which Conviasa owns, directly or indirectly, a 50 percent or greater interest.
Yes.
Yes.
On October 18, 2023, the US Department of Treasury's Office of Foreign Assets Control (OFAC) implemented limited sanctions relief under the Venezuela Sanctions Regulations (the "VSR") to the Government of Venezuela (the "GOV") and certain sectors of the Venezuelan economy in response to the signing of an electoral roadmap agreement between GOV representatives and political opposition parties in Venezuela.
Unambiguously, the State Department and OFAC have said that the Government's execution of political reforms in the lead-up to the next elections is a necessary condition for the continuance of the existing sanctions relief as well as the easing of further penalties.
OFAC, in particular, edited many FAQs that already existed, created two new frequently asked questions (FAQs) and a combined FAQ guidance document (the "October 18 Guidance"), issued three new general licences (GLs), and modified three existing GLs. You may go here to read our previous blog posts about the US sanctions on Venezuela.
The October 18 VSR amendments affect several sectors of the Venezuelan economy. A
Venezuelan Oil & Gas industry
All transactions related to the Venezuelan oil and gas industry that would otherwise be barred under the VSR are temporarily permitted by GL 44 as of April 18, 2024, at 12:01 a.m. EDT. These deals include Petróleos de Venezuela, S.A. ("PdVSA") and companies that possess fifty percent or more of PdVSA (referred to as "PdVSA Entities" collectively).
This authorization is subject to certain conditions. Other than that, the property that was previously blocked by US sanctions is not accessible, and the PdVSA Entities remain Specially Designated Nationals, or "SDNs."
As long as new contracts or money allowed under this general licence remain SDNs, blocking and reporting are not required.
General License 44
GL 44 provides an example list of allowed transactions. Invoicing for goods and services related to these sector operations; producing, lifting, selling, and exporting gas or oil from Venezuela; making new investments in these sectors in Venezuela; and delivering gas and oil from Venezuela to the creditors of GOV and PdVSA Entities in order to pay debts are some examples of these transactions.
Some of the principal restrictions under GL 44 include the following:
no new purchases from Russian companies or joint ventures with them; no new investments made by Russian companies or individuals in control of them in the oil or gas sector operations in Venezuela;
no transactions involving SDNs other than PdVSA Entities, Banco Central de Venezuela, or Banco de Venezuela SA Banco Universal;
and no payments made in the cryptocurrency Pet
The October 18 Guidance states that in order to prolong GL 44, GOV leadership must "follow through with their commitments and take continued concrete steps towards a democratic election by the end of 2024".
Venezuelan Gold Sector: GL 43 permits any transactions that the VSR would otherwise prohibit with relation to CVG Compania General de Mineria de Venezuela CA ("Minerven") and entities in which it owns a 50% or greater stake. GL 43 does not have an expiration date, but OFAC has the right to revoke permission at any time. The government-owned gold mining company Minerven is the only company in the Venezuelan gold market to have been designated as an SDN by OFAC. As with the PdVSA Entities, Minerven remains an SDN, and its property that was previously barred due to US sanctions is still blocked. As long as new contracts or money allowed under this general licence remain SDNs, blocking and reporting are not required. In the Guidance issued on October 18, OFAC also said that "does not intend to target [under US secondary sanctions] any person solely for operating in the gold sector of the Venezuelan economy... contingent on continued concrete steps towards a democratic solution in Venezuela."
Secondary Market Trading of GOV Bonds and PdVSA Securities
In accordance with the amended GL 3I and GL 9H (as well as their corresponding FAQs 661 and 662), US Persons may, unless the VSR prohibits otherwise, divest of GOV bonds identified in GL 3I ("GL 3I Bonds") and "PdVSA Securities" under GL 9H (such as equity in or any debt (such as bonds listed in the GL 9H annexe, promissory notes, and other receivables) of PdVSA Entities issued prior to August 25, 2017. Before this change, such divested bonds or securities could only be sold to non-US people. "US Persons" includes any person physically present in the US, US businesses and their foreign subsidiaries, US citizens, and immigrants who are permanent residents (regardless of where they live or work). Furthermore, for both GLs, the prohibition on US citizens purchasing or investing in the bonds or securities has been repealed. US residents may now trade these financial goods on the secondary market as a result of these improvements. According to FAQ 1136 from OFAC, VSR limitations on US people engaging in the main Venezuelan bond market are still in place. Because to the changes made to GL 9H, US citizens are not allowed to participate in PdVSA Securities issued on or after August 25, 2017.
Can I trade with Venezuela now?
Companies thinking about doing transactions that are now permitted by these relaxed US sanctions should be advised that the aforementioned modifications are temporary and might alter at any time.
The VSR has been modified as a consequence of ongoing talks between the US government, the political opposition, and the GOV. Senior Biden Administration officials said at a briefing on October 18 that by November 30, 2023, the US government hopes to see "progress" on two fronts: (1) the terms of the electoral roadmap agreement being implemented; and (2) the release of political prisoners who were wrongfully detained in both Venezuela and the US.
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