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Venezuela-related Sanctions: President Trump Signs Executive Order Blocking Property of the Government of Venezuela

Client Alert

On August 5, 2019, President Trump ratcheted up the sanctions on Venezuela.¹ On that occasion, he issued an Executive Order (“E.O.”) blocking all property and property interests of the Government of Venezuela and authorizing the Secretary of the Treasury to designate companies as SDNs if they provide material support or provide goods or services to any Venezuela-related SDN.  In addition, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) updated 12 Venezuela-related general licenses and issued 13 new general licenses, including a wind-down general license that expires on September 4, 2019 (GL 28).

As a result of these actions, U.S. companies are now prohibited from engaging in any unlicensed transactions with (1) the Government of Venezuela, including any of its political subdivisions, agencies, and instrumentalities; (2) any entities that are directly or indirectly owned or controlled by the Government of Venezuela; and (3) any individuals or entities acting on behalf of the Government of Venezuela, whether as agents, members of the Maduro regime, or otherwise.  Foreign companies may also be restricted from engaging in unlicensed transactions with these parties to the extent that the transaction has a U.S. nexus, such as the involvement of U.S. parties or U.S. dollar denominated payments.  In addition, foreign companies may be at risk of SDN designation by OFAC if the foreign companies continue to provide material support, assistance, goods, or services to the Government of Venezuela.

It is worth noting that the new E.O. does not impose a country-wide embargo on Venezuela.  Some statements by the U.S. government and media publications have portrayed this E.O. as implementing a territorial embargo on Venezuela.  This is simply not the case.  Under the new E.O., virtually all offices, officials, and state-owned companies controlled by the Maduro regime are treated as SDNs or blocked persons.  Nonetheless, U.S. and foreign companies are still permitted to engage in business with individuals and private companies in Venezuela that are not owned, controlled, or acting as agents for the government.

In addition, OFAC updated 12 general licenses and issued 13 new general licenses that authorize U.S. companies to engage in a range of activities, such as:

• (1) Winding down activities before September 4, 2019, that: (a) involve the Government of Venezuela; (b) were in effect and lawful prior to August 5, 2019; and (c) are not authorized by one of the other general licenses (GL 28);
• (2) Transactions related to Venezuela’s mission to the UN and other diplomatic or consular funds transfers (GLs 22 and 23);
• (3) Transactions related to certain non-governmental organizations’ activities in Venezuela, including humanitarian, democracy-building, educational, and environmental projects (GL 29);
• (4)Transactions incident and necessary to the operation or use of Venezuelan ports and airports (GL 30);
• (5) Transactions with the Venezuelan National Assembly, the Interim President of Venezuela, and any of their officials, representatives, agents, ambassadors, or staff, including any individuals appointed by Interim President Guaidó to the board of a state-owned entity (GL 31).
• (6) Transactions related to overflight payments, emergency landings, or air ambulance or related medical services (GL 33);
• (7) Transactions with CITGO, where the only Government of Venezuela entity involved is CITGO or PDV Holding, Inc. (GL 7C);
• (8) Transactions related to shipments of agricultural commodities (i.e., food, animal feed, etc.), medicine, or medical devices to Venezuela (GL 4C);
• (9) Transactions necessary for maintaining Chevron, Halliburton, Schlumberger Limited, Baker Hughes, or Weatherford International operations in Venezuela involving PdVSA (GL 8C);
• (10) Transactions related to the purchase of refined petroleum products from PdVSA by U.S. persons in Venezuela for personal, commercial, or humanitarian uses (GL 10A);
• (11) Transactions with Nynas AB, a PdVSA subsidiary, where no other Government of Venezuela entities are involved (GL 13C); and
• (12) Transactions incident to the official business of certain international organizations involving the Government of Venezuela (GL 20A).

Please note that these general licenses do not authorize the shipment of diluents to Venezuela and may contain restrictions on remitting payments directly to Venezuela.  Accordingly, before relying on a general license, we recommend that companies review the applicable terms and restrictions.  The full list of Venezuela-related general licenses is available here: https://www.treasury.gov/resource-center/sanctions/Programs/Pages/venezuela.aspx#gl2a.

Companies should also keep in mind that the wind down general license expires in less than 30 days.  Consequently, it would be appropriate to review these general licenses to determine if any ongoing projects will remain authorized past September 4, 2019, and, if not, to consider appropriate wind down arrangements.

We hope this is helpful information, and please do not hesitate to contact our office at 202.342.5277 or egreenberg@gkglaw.com if you have any questions.