The United States has partially lifted sanctions on Venezuela, as a result of a resumption of talks between the Nicolas Maduro-led government and the opposition Unitary Platform. This has taken the form of:
1. General Licence 44, expiring on 18 April 2024, permitting transactions in Venezuela's oil and gas sector that were previously prohibited under the Venezuela Sanctions Regulations1, including those that are related to oil or gas sector operation in Venezuela involving Petroleos de Venezuela, S.A. (PdVSA, the state oil company) and subsidiaries in which it directly or indirectly owns a 50% or greater interest.
Examples of these transactions include:
a) production, lifting, sale and exportation of oil or gas from Venezuela, and provision of related goods and services;
b) payment of invoices for goods or services related to oil or gas sector operations in Venezuela;
c) new investment in oil or gas sector operations in Venezuela; and
d) delivery of oil and gas from Venezuela to creditors of the Government of Venezuela, including creditors of PdVSA and its subsidiaries as described above, for the purpose of debt repayment.
The Licence also permits any associated and necessary transactions with certain sanctioned Venezuelan banks, namely the Central Bank of Venezuela and Banco de Venezuela SA Banco Universal.
There are exceptions, though. General Licence 44 does not permit:
- associated and necessary transactions with certain other sanctioned Venezuelan banks;
- the provision of goods and services to, or new investment in an entity located in Venezuela that is owned or controlled by, or a joint venture with, any 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 such a person;
- certain financial, debt, currency and equity transactions prohibited by US Presidential Executive Orders 13808, 13827 and 13835; and
- the unblocking of any property blocked under the Venezuela Sanctions Regulations.
2. General Licence 43, permitting dealings with national gold mining company Minerven2 and subsidiaries in which it directly or indirectly owns a 50% or greater interest that were previously prohibited under the Venezuela Sanctions Regulations. The Office of Foreign Assets Control, OFAC, which administers and enforces the US sanctions program, has also announced that it does not intend to target anyone solely for operating in the gold sector of the Venezuelan economy3.
3. General Licences 3I and 9H, removing a ban on secondary trading of certain Venezuelan sovereign bonds and certain pre-25 August 2017 debt and equity of PdVSA and subsidiaries in which it directly or indirectly owns a 50% or greater interest. This includes bonds issued by PDV Holding, Inc. and CITGO Holding, Inc. and their respective subsidiaries. The ban on primary trading remains in place, however.
Commentary
This partial lifting of sanctions is not entirely surprising. It is a timely boost to global oil supplies, following the consequences of Russia's invasion of Ukraine. We had also already seen the issuance of General Licence 41 roughly a year ago, which allowed Chevron Corporation to resume limited natural resource extractions through its joint ventures in Venezuela.
Having said this, it is particularly notable that General Licence 44, permitting transactions in Venezuela's oil and gas sector, only has a six-month duration. It appears renewal and probably the entire existence of this sanctions relaxation is dependent on the Maduro government following through with commitments and taking continued, concrete steps towards a democratic election by the end of 2024.
This already appears questionable. Venezuela's opposition held a primary to choose a single candidate to run against Maduro in a presidential election, and the easy winner was Maria Corina Machado, a politician banned by the government. Maduro's reaction has been to allege fraud in the poll, and then to declare the whole exercise illegal as well as opening a criminal investigation.
Given the potential uncertainty, we recommend that clients rely on the licences described above with appropriate caution and, if engaging in licensed transactions and dealings, seek advice on appropriate legal safeguards which can be actioned if these licenses expire or are revoked.
1 31 CFR part 591
2 CVG Compania General de Mineria de Venezuela CA
3 This is in the context of US Presidential Executive Order 13850, which expressly empowers OFAC to sanction persons who operation in the gold sector of the Venezuelan economy.