The U.S. Department of the Treasury Office of Foreign Assets Control ("OFAC") issued Venezuela General License 5, allowing U.S. persons to partake in certain transactions related to the Petroleos de Venezuela SA 2020 ("PdVSA") 8.5 percent bond.

President Trump's recent Executive Order ("E.O. 13835") imposes sanctions against the Venezuelan government and includes transactions related to the "pledging of collateral by the Government of Venezuela" of equity in Venezuelan state-owned firms. OFAC issued General License 5 to address questions concerning how E.O. 13835 would impact the ability to enforce bondholder rights to shares in CITGO, a subsidiary of PdVSA, which serve as collateral for the PdVSA 2020 8.5 percent bond. General License 5 removes these sanctions as an "obstacle to holders of the PdVSA 2020 8.5 percent bond gaining access to their collateral" and prevents the regime of Venezuelan president Nicolás Maduro "from using [E.O. 13835] to default on its bond obligations without consequence."(To the extent dealings related to the PdVSA 2020 8.5 percent bond are prohibited by other sanctions, those restrictions remain in place.)

OFAC also published two new frequently asked questions ("FAQs"). One FAQ explains the purpose and effect of General License 5, including to keep "sanctions pressure where it belongs—on the Maduro regime." The other FAQ pertains to questions regarding whether E.O. 13835 prevents a U.S. person with a "legal judgment against the Government of Venezuela from attaching and executing against Venezuelan government assets."

Commentary / James Treanor



The issuance of General License 5 demonstrates the willingness of OFAC to consider real-world concerns raised by the financial community and others in the private sector. One can expect that a favorable response to those concerns is more likely where, as here, a limited exception actually has the effect of furthering, rather than undercutting, the larger goal of a particular sanctions program—in this case, the exertion of economic pressure on the Government of Venezuela.

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