On June 6, 2019, the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) amended three Venezuela-related general licenses (re-issued as General License No. 7B, General License No. 8A, and General License 13A) to clarify that these authorizations do not authorize US Persons to engage in transactions or dealings related to the exportation or reexportation of diluents, directly or indirectly, to Venezuela. Such general licenses (“GLs”) were originally issued concurrent with the designation of Petróleos de Venezuela SA (“PdVSA”) as a Specially Designated National (“SDN”) on January 28, 2019, under Executive Order 13850. Our original blog post regarding the designation of PdVSA is available here.
GLs 7B and 13A were previously issued by OFAC as GLs 7A and 13 to authorize transactions with certain companies owned 50% or more by PdVSA (“Authorized PdVSA Subs”) that would otherwise prohibited due to PdVSA’s designation as a SDN. Such Authorized PdVSA Subs include CITGO Holding Inc. and PDV Holding Inc. under GL 7B and Nynas AB under GL 13A. Prior to these changes, GLs 7A and 13 had prohibited exports/reexports of items to PdVSA or other PdVSA Subs (which would have covered diluents), but they now also include clarifying language that no diluents are to be exported to Venezuela pursuant to those GLs. Our previous blog post regarding the application of US sanctions to the Authorized PdVSA Subs is available here.
GL 8 was previously issued to authorize Chevron Corporation, Halliburton, Schlumberger Limited, Baker Hughes, and Weatherford International PLC to continue operations in Venezuela involving PdVSA despite the latter’s SDN designation. GL 8 had already included language stating that the export/reexport of diluents was not authorized, but this language was broadened to apply to “any transactions and dealings” and to exclude “from the United States,” thus prohibiting US Persons from any role in exports/reexports of diluents (regardless of country of origin) to Venezuela. In sum, these GLs have not changed significantly in terms of substance. Rather, all three GLs were re-issued and amended to highlight the US sanctions compliance risks related to diluent exports/reexports to Venezuela (regardless of origin).
In addition, OFAC issued a new FAQ 672 to its website, which explains that the export of diluents is not permitted because they play a key role in the transport and export of Venezuelan petroleum, a primary source of revenue for the current Government of Venezuela. In that FAQ, OFAC also threatens US secondary sanctions (e.g., SDN designation) against parties that supply diluents to PdVSA.