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OFAC Suspends Certain U.S. Sanctions Targeting Venezuela with New and Amended General Licenses

On October 18, 2023, the United States announced the suspension of certain sanctions related to Venezuela through the issuance of new and revised general licenses.

The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury has authorized certain transactions that would otherwise be prohibited pursuant to the Venezuela sanctions program by issuing new general licenses, updating existing general licenses, and issuing amended guidance. The general licenses suspend certain U.S. sanctions related to Venezuela. According to OFAC, this sanctions relief comes in response to the signing of a political agreement between Venezuela’s Unitary Platform and representatives of the Maduro regime to implement democratic reforms.

Certain debt and equity

OFAC amended two general licenses to allow for unrestricted secondary market trading in specified Venezuela sovereign bonds (GL 3I) and certain debt or equity issued by Petróleos de Venezuela, S.A. (PdVSA) (GL 9H). GL 3I authorizes U.S. persons to engage in all transactions related to, the provision of financing for, and other dealings involving bonds issued by the Venezuelan government and listed in the Annex to GL 3I, including divestment and transfer, and facilitation thereof, to U.S. persons. GL 9H authorizes U.S. persons to engage in all transactions that are ordinarily incident and necessary to dealings in any debt of, or equity in, PdVSA (or any entity directly or indirectly owned 50 percent or more by PdVSA), issued prior to August 25, 2017, including divestment and transfer, and facilitation thereof, to U.S. persons. This includes dealings in bonds issued by PDV Holding, Inc. and CITGO Holding, Inc., or any of their subsidiaries. Previous versions of GL 3I and GL 9H authorized limited secondary market trading, including by requiring that any transfer or divestment-related transactions of the relevant securities only be to a non-U.S. person. U.S. persons remain prohibited from trading in the primary Venezuelan bond market.

In addition, OFAC issued General License 5M (GL 5M), which authorizes all transactions related to, the provision of financing for, and other dealings in, the PdVSA 2020 8.5 Percent Bond, starting on January 18, 2024. The only change in this amended general license from the previous version is to delay the start date of the authorized activity.

Gold

OFAC issued a new general license, General License 43 (GL 43), authorizing all transactions involving CVG Compania General de Mineria de Venezuela CA (Minerven), or any entity in which Minerven directly or indirectly owns a 50 percent or greater interest. Minerven is the only entity designated as a sanctions target by OFAC for operating in the gold sector of the Venezuelan economy. OFAC has issued guidance that it does not intend to sanction any person solely for operating in the gold sector of the Venezuelan economy. According to the U.S. Treasury Department, this authorization was motivated, in part, by its potential to reduce black-market trading in gold.

Oil and gas

Pursuant to new General License 44 (GL 44), OFAC has temporarily authorized all transactions related to oil or gas operations in Venezuela that would otherwise be prohibited under the Venezuela Sanctions Regulations. This authorization includes transactions involving PdVSA, or any entity in which PdVSA directly or indirectly owns a 50 percent or greater interest. It also allows for ordinarily incident and necessary financial transactions with certain blocked Venezuelan banks related to the oil and gas sector. Specifically, as detailed in OFAC guidance (“Frequently Asked Questions Related to the Suspension of Certain U.S. Sanctions with Respect to Venezuela on October 18, 2023”), GL 44 authorizes the sale of oil and gas from Venezuela to the United States and other jurisdictions and the payment of taxes, royalties, costs, fees, dividends, and profits related to oil and gas sector operations or transactions involving PdVSA. Transactions covered by the authorization, include: (1) the production, lifting, sale, and exportation of oil or gas from Venezuela, and provision of related goods and services; (2) the payment of invoices for goods or services related to oil or gas sector operations in Venezuela; (3) new investment in oil or gas sector operations in Venezuela; and (4) the delivery of oil and gas from Venezuela to creditors of the Government of Venezuela, including creditors of PdVSA entities, for the purposes of debt repayment.

Notably, GL 44 does not authorize the provision of goods or services to, or new investment in, an entity owned or controlled by, or a joint venture with, an entity located in the Russian Federation, nor does this general license authorize transactions related to new investment in the oil and gas sectors in Venezuela by a person located in the Russian Federation, or any entity owned or controlled by any such person. 

GL 44 is set to expire on April 18, 2024.

Repatriation

Finally, General License 45 (GL 45) authorizes all transactions ordinarily incident and necessary to the repatriation of Venezuelan nationals from non-U.S. jurisdictions in the Western Hemisphere to Venezuela involving Consorcio Venezolano de Industrias Aeronáuticas y Servicios Aéros (Conviasa), or any entity in which Conviasa directly or indirectly owns a 50 percent or greater interest. Only transactions made exclusively for the purpose of repatriation are authorized under this general license.

Key takeaways

OFAC cautioned that the authorizations issued on October 18, 2023 are subject to amendment or revocation at any time. The U.S. government emphasized that this suspension of certain sanctions is contingent upon the Maduro regime upholding its commitments under the electoral roadmap agreement for 2024.

Allen & Overy’s experienced U.S. sanctions team, in coordination with A&O’s Global Sanctions Group, has been tracking these developments closely and can assist businesses in navigating these new authorizations in the Venezuela Sanctions Regulations.