US government sanctions Petróleos de Venezuela, authorizes US persons to engage in certain limited transactions

The United States government has issued new sanctions in response to the growing unrest in Venezuela. On January 23, the United States recognized Juan Guaido as the new interim President of Venezuela. Nonetheless, Nicolas Maduro has refused to step down. US Secretary of State Mike Pompeo stated that the latest US sanctions related to Venezuela's state producer of oil are meant to "preserve the core pillar of Venezuela's national assets for the people and a democratically elected government."

On January 28, 2019, the Department of the Treasury's Office of Foreign Assets Control (OFAC) designated Petróleos de Venezuela S.A. (PdVSA) as a Specially Designated National (SDN). With this designation, US persons, including US entities, their foreign branches and US citizens or permanent residents located anywhere in the world, are now prohibited from engaging in any transactions with PdVSA or any entity owned 50 percent or more by PdVSA, unless otherwise authorized. This designation has wide-ranging impacts, as PdVSA owns or is part of joint ventures around the world, including several within the United States.

OFAC has sought to limit these potential wide-ranging impacts on US persons by concurrently issuing a series of General Licenses authorizing US persons to engage in certain transactions with PdVSA and/or certain of its 50 percent or more owned subsidiaries. These General Licenses, described further below, create a complex web of limited authorizations for US persons with various expiration dates.

Whether a General License authorizes a particular transaction is highly dependent on the specific facts and circumstances of that transaction. These summaries should not serve as a substitute for a review of the language and requirements of the actual General Licenses.

The General Licenses issued with respect to the designation of PdVSA cover the following subjects:

• Maintenance or wind down General Licenses
  General License 11 : Authorizing Certain Activities Necessary to Maintenance or Wind Down of Operations or Existing Contracts with Petroleos De Venezuela, S.A. (PdVSA).
  • Expires on March 29, 2019.
  • Authorizes US persons who are the employees or contractors of non-US entities to engage in transactions and activities ordinarily incident and necessary to the maintenance or wind down of operations, contracts, or other agreements involving PdVSA or any entity owned 50 percent or more by PdVSA.
  • Authorizes US financial institutions to reject (not block) funds transfers involving certain PdVSA entities so long as the funds are not being routed through the US or to or from US persons.
  • Includes a list of transactions not authorized by this General License.
  General License 12 : Authorizing Certain Activities Necessary to Wind Down of Operations or Existing Contracts with Petroleos de Venezuela, S.A. (PdVSA)
  • Authorizes all transactions and activities ordinarily incident and necessary to purchase and import petroleum and petroleum products into the United States from PdVSA and any entity owned 50 percent or more by PdVSA. Expires on April 28, 2019.
  • Authorizes all transactions ordinarily incident and necessary to wind down of operations, contracts and other agreements involving PdVSA and any entity owned 50 percent or more by PdVSA that were in effect prior to January 28, 2019. Expires on February 27, 2019.
  • May require blocking of funds depending on entities involved.
  • Includes a list of transactions not authorized by this General License.

• General Licenses related to dealings in bonds and/or debt:
  General License 3A : Authorizing Transactions Related to, Provision of Financing for, and Other Dealings in Certain Bonds.
  • No expiration date.
  • Amends and replaces previously existing General License 3.
  • Authorizes certain transactions in bonds included in the Annex to the General License.
  • Authorizes transactions related to financing and other dealings in bonds issued prior to August 25, 2017 and involving the Government of Venezuela, but excludes certain PdVSA subsidiaries.
  General License 9 : Authorizing Transactions Related to Dealings in Certain Debt.
  • No expiration date.
  • Authorizes "all transactions and activities…ordinarily incident and necessary to dealings in any debt… [of PdVSA and any entity it owns 50 percent or more] issued prior to August 25, 2017… provided that any divestment or transfer of, or facilitation of divestment or transfer of, any holdings in such debt must be to a non-U.S. person… include facilitating, clearing, and settling transactions to divest to a non-U.S. person PdVSA-related debt, including on behalf of U.S. persons."
  • Authorizes "all transactions and activities…ordinarily incident and necessary to dealings in any bonds that were issued prior to August 25, 2017" by PDV Holdings, Inc., CITGO Holdings, Inc., and Nynas AB.
  • Includes a list of transactions not authorized by this General License.

• General Licenses authorizing certain activities involving PdVSA subsidiaries:
  General License 7 : Authorizing Certain Activities Involving PDV Holding, Inc. and CITGO Holding, Inc. Contains two separate authorizations and two expiration dates:
  • Authorizes transactions by PDV Holding, Inc. and CITGO Holding, Inc. (both US entities) involving the purchase and importation of petroleum from PdVSA; expires on April 28, 2019.
  • Authorizes transactions involving PDV Holding, Inc. and CITGO Holding, Inc. so long as PdVSA or other prohibited entities are not involved; expires on July 27, 2019. May require certain payments to be made into a blocked, interest-bearing account in the United States, depending on the entities involved.
  • Includes a list of transactions not authorized by this General License.
  General License 13 : Authorizing Certain Activities Involving Nynas AB.
  • Expires on July 27, 2019.
  • Authorizes all transactions with Nynas AB (a joint venture between Finnish company Neste Oil and PdVSA) and its subsidiaries so long as PdVSA or other prohibited entities are not involved.
  • Includes a list of transactions not authorized by this General License.

  Learn more about this development by contacting either of the authors.

• General Licenses with respect to operations in Venezuela:
  General License 8 : Authorizing Transactions Involving Petroleos de Venezuela, S.A. (PdVSA) Prohibited by Executive Order 13850 for Certain Entities Operating in Venezuela.
  • Expires on July 27, 2019.
  • Only applicable to the following entities and their subsidiaries:
    • Chevron Corporation
    • Halliburton
    • Schlumberger Limited
    • Baker Hughes, a GE Company
    • Weatherford International, Public Limited Company
    • Includes a list of transactions not authorized by this General License.

  General License 10 : Authorizing the Purchase in Venezuela of Refined Petroleum Products from Petroleos de Venezuela, S.A. (PdVSA).

  • No expiration date.
  • Authorizes US persons in Venezuela to purchase from PdVSA or its subsidiaries refined petroleum products for personal, commercial or humanitarian uses.
  • Includes a list of transactions not authorized by this General License.

• General License with respect to USG:
  General License 14 : Official Business of the United States.
  • No expiration date.
  • Authorizes all transactions that are for the conduct of official business of the US government by employees, grantees or contractors.

Learn more about these licenses by contacting either of the authors.