On October 18, 2023, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) issued certain targeted relief from Venezuela-related sanctions, in the form of several new or amended general licenses (GLs). In its announcement, OFAC indicated that the licenses were issued in response to the signing of a political agreement promoting competitive and fair elections between representatives of the Maduro regime and the Unitary Platform (Plataforma Unitaria, or PU) opposition in Venezuela.
OFAC also issued or amended several Frequently Asked Questions (FAQs), noting it was prepared to amend or revoke the authorizations at any time should Maduro representatives fail to respect their commitments to the Venezuelan opposition.
We'll discuss the key new Venezuela-related authorizations, as well as takeaways and best practices for persons contemplating commercial ties with Venezuela.
Summary of Relief
The U.S. government suspended certain sanctions measures in three sectors of the Venezuelan economy: oil and gas, gold, and finance.
- Oil and Gas Sector. GL 44 is a six-month authorization allowing for all transactions involving the Venezuelan-state owned oil company, Petroleos de Venezuela, S.A. (PDVSA) that are related to oil and gas sector operations in country. The GL expires on April 18, 2024, unless renewed. The authorization includes transactions related to physical oil and gas operations in Venezuela, new investment in the oil and gas sector, and the export and sale of oil and gas from Venezuela, among other activities. GL 44 also allows such transactions to be processed through blocked Venezuelan banks Banco Central de Venezuela and Banco de Venezuela SA Banco Universal.
- Gold Sector. GL 43 authorizes all transactions involving CVGH Compania General de Mineria de Venezuela CA (Minerven), the Venezuelan state-owned gold mining company. Importantly, GL 43 is not time-limited and OFAC noted in a FAQ that it does not intend to target any person for solely operating in the gold sector of the Venezuelan economy. Such relief is contingent on Maduro-regime commitments toward free and fair elections, however.
- Financial Sector. OFAC issued two amended general licenses, GL 3I and GL 9H which authorize, respectively, secondary trading in Government of Venezuela (GoV)-issued and PDVSA-issued bonds specified in each license's annex (the GL 3I or GL 9H Bonds). The authorizations now allow for the divestment or transfer, or facilitation of divestment or transfer of such bonds, to U.S. persons. Previous iterations of these licenses banned secondary trading by only allowing for divestment of such bonds to non-U.S. persons.
- Sanctions on Venezuela remain, and PDVSA, Minerven, and the GoV, among other Venezuelan parties, are still considered blocked persons pursuant to U.S. sanctions. The various authorizations issued on October 18 also do not generally unblock property previously blocked under U.S. sanctions. As such, Venezuela sanctions remain complex and persons seeking to do business involving Venezuela should continue to carefully scrutinize their business dealings in-country, including any contracts, agreements, or transactions, particularly those concerning U.S. dollars or involving U.S. persons.
- Given that the measures taken by OFAC with respect to the energy sector are time-limited, persons seeking to engage in new business with PDVSA or Minerven should ensure any agreements or contracts with such parties include provisions allowing them to address potential changes in the sanctions status of relevant parties. These would include, for example, standard sanctions or "compliance with law" clauses, allowing for contract parties to terminate their obligations if the applicable Venezuela-related GLs expire, or are otherwise revoked.
- Persons seeking to trade in GL 3I or 9H bonds in the secondary market should be aware that the value of such bonds may be affected by geopolitical risk and therefore the GL 3I or 9H bonds may be subject to increased volatility. Any revocation of Venezuela-related sanctions relief could erode some or all of an investor's principal in such bonds.
- Given the basis on which these new OFAC authorizations were implemented and the evolving political climate in Venezuela, careful monitoring and analysis of developments in Venezuela, particularly up to and including the 2024 presidential elections in-country, is necessary. The outcome of such events could result in additional changes in U.S. sanctions, including the possible revocation of sanctions relief, or continued easing of, Venezuela-related sanctions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.