On January 31, 2019, OFAC issued eleven new FAQs and amended two existing FAQs in connection with the designation of Petróleos de Venezuela, S.A. (“PdVSA”) as a Specially Designated National (“SDN”) pursuant to Executive Order 13850 on January 28, 2019. In addition, on February 1, 2019, OFAC amended two PdVSA-related general licenses (“GL”) and issued two additional FAQs describing the scope of those amendments, which modify the terms under which certain transactions involving PdVSA bonds and securities are authorized. Our prior blog post on the SDN designation of PdVSA and the previously issued Venezuela GLs is available here.
General License 3B
General License 3A (“GL 3A”) was reissued as General License 3B (“GL 3B”) and authorizes transactions related to, the provision of financing for, and other dealings in the bonds specified in the Annex to GL 3B, provided that any divestment or transfer of, or facilitation of divestment or transfer of, any holdings in such bonds be to a non-US person. OFAC also moved some bonds identified in the GL 3A Annex to the amended version of General License 9 (“GL 9”) that OFAC issued at the same time as GL 3B.
While GL 9 included the requirement that US Persons divesting PdVSA debt must transfer any such holdings to non-US persons, GL 3A did not include that requirement when it was issued on January 28, 2019. GL 3A (and its predecessor General License 3) both authorized US Persons to continue dealing in identified bonds issued by PdVSA and other entities owned or controlled by the Government of Venezuela.
In addition, GL 3B includes a new provision authorizing certain transactions to facilitate, clear, and settle trades of holdings in the bonds specified in the GL 3B Annex , provided such trades were placed prior to February 1, 2019 at 4:00 p.m. EST. It also now authorizes certain transactions to wind down financial contracts or other agreements entered into prior to February 1, 2019 involving the bonds specified in the GL 3B Annex, through March 2, 2019. FAQ 662 provides updated guidance about GL 3B’s revised scope.
General License 9A
GL 9 was re-issued as General License 9A (“GL 9A”) and authorizes transactions that are ordinarily incident and necessary to dealings in “PdVSA securities” issued prior to August 25, 2017. In GL 9A, “PdVSA securities” covers debt (including the bonds listed in the GL 9A Annex, promissory notes, and other receivables) of, or equity in, PdVSA or any entities owned 50% or more by PdVSA. GL 9A includes a new provision authorizing transactions to facilitate, clear, and settle trades of holdings in PdVSA securities placed before January 28, 2019 at 4:00 p.m. EST. It also now authorizes certain transactions through March 2, 2019 to wind down financial contracts or other agreements entered into prior to January 28, 2019 at 4:00 p.m. EST involving PdVSA securities issued prior to August 25, 2017.
GL 9A did not change the authorization in GL 9 for transactions that are ordinarily incident and necessary to dealing in bonds issued prior to August 25, 2017 by the following PdVSA entities and their subsidiaries: PDV Holdings, Inc., CITGO Holdings, Inc., and Nynas AB. FAQ 661 provides updated guidance about GL 9A’s revised scope.
In addition, revised FAQ 595 clarifies that General License 5, which authorizes certain transactions related to the PdVSA 2020 8.5 Percent Bond, remains in effect despite PdVSA itself being designated as an SDN. Revised FAQ 648 provides additional guidance on what activities are considered “maintenance” as the term is used in the PdVSA-related GLs. Finally, the newly issued FAQs 650-660 provide additional guidance on issues arising in connection with the SDN designation of PdVSA and the scope of the previously issued GLs.
FAQs 652 and 653 provide guidance about issues related to mutual funds and exchange traded funds that engage in transactions involving or tracking holdings in SDN entities. OFAC’s guidance in these two FAQs is not limited to SDNs designated under US sanctions targeting Venezuela.