Suspension of Venezuela- and PDVSA-Related Sanctions

On October 18, 2023, the U.S. government suspended certain sanctions on operations in Venezuela’s oil and gas sector; the gold sector of the Venezuelan economy; and secondary-market purchases of certain Venezuelan sovereign bonds and shares. Specifically, the U.S. Department of the Treasury’s Office of Foreign Assets Control ("OFAC") issued the following regulations:

General License ("GL") 44: temporarily authorizes all transactions related to operations in Venezuela’s oil and gas sector, including ordinary and necessary financial transactions with certain blocked Venezuelan banks, such as the Banco Central de Venezuela ("BCV") and Banco de Venezuela SA Banco Universal.

GL 43: authorizes certain transactions related to CVG Compañía General de Minería de Venezuela CA ("Minerven"), the Venezuelan state-owned mining company designated under Executive Order (E.O.) 13850, and states that the U.S. government does not intend to sanction persons solely for operating in the gold sector of the Venezuelan economy.

GL 3I and GL 9H: remove secondary-market trading prohibitions on the purchase of certain Venezuelan sovereign bonds and pre-2017 bonds or shares issued by Petróleos de Venezuela S.A. ("PdVSA").

DRT Commentary

The U.S. government suspended certain sanctions in response to recent geopolitical developments related to Venezuela. However, several key sanctions remain in force, including prohibitions on (i) transactions involving financial institutions other than the Banco Central de Venezuela or Banco de Venezuela SA, Banco Universal; (ii) the provision of goods or services to, or new investment in, an entity located in Venezuela that is owned or controlled by, or in a joint venture with, an entity located in the Russian Federation; (iii) new debt transactions, such as providing loans to PdVSA, other than for the payment of invoices or the repayment of debt through the delivery of oil or gas; and (iv) transactions involving virtual assets issued by, for, or on behalf of the Government of Venezuela. In addition, the new general licenses do not authorize the unblocking of any property blocked under Venezuela-related sanctions, or transactions involving individuals designated on the Specially Designated Nationals and Blocked Persons List ("SDN").

To prevent violations of OFAC sanctions or any other U.S. law, including the Foreign Corrupt Practices Act ("FCPA") and the Money Laundering Control Act, persons and organizations subject to U.S. jurisdiction should conduct an OFAC review of any transaction involving sanctioned persons or countries to determine whether OFAC authorization is required. If necessary, interested parties should seek a specific license or interpretive guidance from OFAC before proceeding with the transaction. Companies and financial institutions can also prevent, detect, and respond appropriately to sanctions violations by designing and implementing a Sanctions Compliance Program ("SCP"). Having an effective SCP is also an important mitigating factor that OFAC will consider when deciding whether to impose sanctions for an apparent violation of its regulations or when calculating the appropriate penalty.

DRT has extensive experience advising individuals and international organizations on their efforts to ensure sanctions compliance. This work includes transaction analysis, OFAC compliance assessments, SCP design and implementation, and/or requests for interpretive guidance or specific licenses from OFAC.

* By Michael Diaz, Jr, Javier Coronado Diaz, Isabela Hernández-Peredo Martínez.

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