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US Government Provides Limited Relaxation of Venezuela Sanctions Through New and Amended OFAC General Licenses

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On October 18, 2023, the US Department of the 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 Venezuelan political opposition parties. OFAC and the State Department have made clear that additional sanctions relief and the continuance of this sanctions relief depend on the GOV implementing political changes leading up to forthcoming elections.

Specifically, OFAC issued three new general licenses (“GLs”) and amended three existing GLs; published two new frequently asked questions (“FAQs”) and a consolidated FAQ guidance document (the “October 18 Guidance”); and amended several existing FAQs. Our previous blog posts about US sanctions targeting Venezuela are available here.

The October 18 changes to the VSR affect several sectors of the Venezuelan economy. We summarize the key changes below.

  • Venezuelan Oil and Gas Sector: Effective through 12:01 am EDT on April 18, 2024, GL 44 temporarily authorizes all transactions otherwise prohibited under the VSR relating to the Venezuelan oil and gas sector, including transactions with Petróleos de Venezuela, S.A. (“PdVSA”) and entities owned 50% or more by PdVSA (together, “PdVSA Entities”). This authorization is subject to certain conditions. The PdVSA Entities otherwise remain Specially Designated Nationals (“SDNs”) and their property that was previously blocked due to US sanctions remains blocked. While they remain SDNs, new contracts or funds authorized by this general license do not require blocking or reporting.
    • GL 44 provides an illustrative list of permissible transactions, including:
      • the production, lifting, sale, and exportation of oil or gas from Venezuela, and provision of related goods and services;
      • the payment of invoices for goods and services related to oil or gas sector operations in Venezuela;
      • new investment in oil or gas sector operations in Venezuela; and
      • delivery of oil and gas from Venezuela to creditors of the GOV and PdVSA Entities, for purposes of debt repayment.
    • Some of the key restrictions under GL 44 include prohibitions on:
      • the provision of goods or services to, or new investment in, an entity located in Venezuela that is owned or controlled by, or a joint venture with, an entity located in Russia;
      • transactions related to new investment in oil or gas sector operations in Venezuela by a person located in Russia or any entity owned or controlled by a person located in Russia;
      • transactions involving SDNs other than PdVSA Entities, Banco Central de Venezuela, or Banco de Venezuela SA Banco Universal; and
      • payments in the Petro cryptocurrency established by the GOV.

The October 18 Guidance states that GL 44 will only be renewed if GOV leadership “follow through with their commitments and take continued concrete steps toward a democratic election by the end of 2024.”

  • Venezuelan Gold Sector: GL 43 authorizes all transactions otherwise prohibited by the VSR with CVG Compania General de Mineria de Venezuela CA (“Minerven”) and entities it owns 50% or more. GL 43 does not have an expiration date but it could be revoked by OFAC at any time. Minerven is a GOV-owned gold mining company and the only entity designated as SDN by OFAC for operating in the Venezuelan gold sector. As with the PdVSA Entities, Minerven remains an SDN and its property that was previously blocked due to US sanctions remains blocked. While they remain SDNs, new contracts or funds authorized by this general license do not require blocking or reporting. Additionally, OFAC has stated in the October 18 Guidance that it “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 toward a democratic solution in Venezuela.”
  • Secondary Market Trading in GOV Bonds and PdVSA Securities:OFAC has amended GL 3I and GL 9H (and their respective FAQs 661 and 662) to allow divestment otherwise prohibited by the VSR to US Persons of GOV bonds identified in GL 3I (“GL 3I Bonds”) and “PdVSA Securities” under GL 9H (e.g., equity in or any debt (e.g., bonds listed in the GL 9H annex, promissory notes, other receivables) of PdVSA Entities issued prior to August 25, 2017). Prior to this change, such divested bonds or securities could only be sold to non-US persons. (“US Persons” include US companies and their non-US branches, US citizens and permanent resident aliens (wherever located or employed), and any person physically located in the United States.) Both GLs also no longer have a US Person prohibition on purchasing or investing the bonds or securities. These changes mean that US Persons may engage in the secondary market for these financial instruments. In FAQ 1136, OFAC notes that VSR restrictions on US Persons trading in the primary Venezuelan bond market remain in place. The changes to GL 9H do not authorize US Persons to deal in PdVSA Securities issued on or after August 25, 2017.

Companies considering engaging in transactions now permitted under these relaxed US sanctions should keep in mind the temporary and conditional nature of the above developments. The changes to the VSR are a byproduct of ongoing negotiations between the GOV, the political opposition, and the US government. In a briefing from senior Biden Administration officials on October 18, the US government expects to see “progress” on two issues before the end of November 2023: (1) actualization of the terms of the electoral roadmap agreement and (2) the release of wrongfully detained US nationals and Venezuelan political prisoners.

A Spanish version of this blog post can be found here.

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Ms Stafford Powell advises on all aspects of outbound trade compliance, including compliance planning, risk assessments, licensing, regulatory interpretations, voluntary disclosures, enforcement actions, internal investigations and audits, mergers and acquisitions and other cross-border activities. She develops compliance training, codes of conduct, compliance procedures and policies. She has particular experience in the financial services, technology/IT services, travel/hospitality, telecommunications, and manufacturing sectors.

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Alex advises clients on compliance with US export controls, trade and economic sanctions, export controls (Export Administration Regulations (EAR); International Traffic in Arms Regulations (ITAR)) and antiboycott controls. He counsels on and prepares filings to submit to the US Government's Committee on Foreign Investment in the United States (CFIUS) with respect to the acquisition of US enterprises by non-US interests. Moreover, Alex advises US and non-US companies in the context of licensing, enforcement actions, internal investigations, compliance audits, mergers and acquisitions and other cross-border transactions, and the design, implementation, and administration of compliance programs. He has negotiated enforcement settlements related to both US sanctions and the EAR.

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Rob assists multinational companies on OFAC sanctions, export controls, and other trade laws in the context of compliance, licensing, internal investigations, mergers and acquisitions, government disclosures, and enforcement actions. He has experience assisting clients navigate sanctions and export control in the following sectors: semiconductor design and manufacturing, telecommunications, pharmaceuticals, consumer goods, and financial services. Rob has also assisted start-ups and medium-sized businesses encountering OFAC sanctions and export controls for the first time. Rob's pro bono practice includes providing sanctions and export control advice to a global NGO providing humanitarian relief in conflict zones. He also advises a global pro-bono law firm in advocacy matters relevant to sanctions and export controls. He has also served on the board of directors of a nonprofit working to improve the mental health environment for university students.

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