On August 24, 2017, President Trump issued Executive Order 13808 (E.O. 13808) titled “Imposing Additional Sanctions With Respect to the Situation in Venezuela” and the Department of the Treasury’s Office of Foreign Assets Control (OFAC) released frequently asked questions clarifying certain items related to the Executive Order. As we have previously outlined, E.O. 13808 prohibits certain transactions involving the Venezuelan Government, defined broadly to include Petroleos de Venezuela, S.A. (PdVSA), and any other entity owned or controlled by the Venezuelan Government.
In a press release accompanying the issuance of E.O. 13808, the White House indicated that the new prohibitions were “carefully calibrated to deny the Maduro dictatorship a critical source of financing to maintain its illegitimate rule.” Nevertheless, these sanctions represent a significant shift in the Administration’s approach to the ongoing situation in Venezuela. Before E.O. 13808, new sanctions related to Venezuela were limited to listing current and former government officials on the Specially Designated Nationals (SDN) List. Now, all transactions related to, provision of financing for, and other dealings in the following by a United States person or within the United States are prohibited:
• new debt with a maturity of greater than 90 days of PdVSA;
• new debt with a maturity of greater than 30 days, or new equity, of the Government of Venezuela, other than debt of PdVSA covered above;
• bonds issued by the Government of Venezuela prior to August 25, 2017, i.e., the sanctions effective date;
• dividend payments or other distributions of profits to the Government of Venezuela from any entity owned or controlled, directly or indirectly, by the Government of Venezuela; or
• purchasing, directly or indirectly, securities from the Government of Venezuela other than those securities qualifying as new debt with a maturity of less than or equal to 90 days (for PdVSA) or 30 days (for the rest of the Government of Venezuela).
These prohibitions apply to any entities in which the Government of Venezuela holds a 50% or greater interest. Importantly, E.O. 13808 does not require U.S. persons to block the property or interests in property of the Government of Venezuela. U.S. persons, however, must reject transactions or dealings that are prohibited by E.O. 13808, and U.S. financial institutions must file a rejected transactions report with OFAC within 10 business days.
In conjunction with the issuance of E.O. 13808, OFAC issued four general licenses. Generally, these licenses authorize: (i) certain activities necessary to wind down existing contracts, (ii) certain transactions with Citgo, (iii) certain transactions related to, provision of financing for, and other dealings in OFAC identified bonds, and (iv) certain transactions related to, provision of financing for, and other dealings in the exportation or reexportation of agricultural commodities, medicine, medical devices, or replacement parts and components.