U.S. Suspends Some Economic Sanctions in Venezuela, Though A Number of Restrictions Remain

The United States has suspended some economic sanctions on Venezuela in response to the signing of an electoral roadmap agreement between representatives of Venezuela President Nicolas Maduro and the Unitary Platform representing the Venezuelan opposition. The electoral roadmap sets forth various commitments of the Maduro regime to reinstate candidates for political office and release wrongfully detained U.S. nationals and Venezuelan political prisoners. 

Responding to these democratic developments, the Treasury Department’s Office of Foreign Assets Control (OFAC) has issued general licenses authorizing U.S. persons to engage in certain transactions involving Venezuela’s oil and gas sector, gold sector, and removing the ban on secondary market purchases of certain Venezuelan sovereign bonds and equity. Importantly, the U.S. Government may amend or revoke these authorizations at any time should the Maduro regime fail to abide by its electoral roadmap commitments. All other economic sanctions against Venezuela remain in effect, and as such, Venezuela continues to be a challenging business environment for U.S. companies mindful of compliance.

General Licenses Lifting Certain Restrictions

OFAC has issued four general licenses in response to the electoral roadmap agreement:

• Oil and Gas Sector: General License 44 is a six-month temporary authorization of all transactions involving Venezuelan state-owned oil company Petroleos de Venezuela and its majority-owned subsidiaries (“PdVSA”) related to oil and gas operation in Venezuela. These transactions include the production, sale and export of Venezuelan oil and gas, and provision of related goods and services, as well as new investment in the Venezuela oil and gas sector. However, such transactions cannot involve any sanctioned Venezuelan bank other than the Banco Central de Venezuela or Banco de Venezuela SA Banco Universal, or transactions in Venezuela with any touchpoints to Russian entities or individuals. Most importantly, General License 44 is operative only through April 18, 2024, and OFAC has indicated it will only be renewed if Venezuela meets its commitments under the electoral roadmap.
• Gold Sector: General License 43 authorizes all transactions with Minerven, the Venezuela state-owned gold mining company.
• Secondary Trading of Venezuelan sovereign bonds and PdVSA debt and equity: Amended general licenses 3I and 9H remove the secondary market trading bans on purchases of certain Venezuelan sovereign bonds and pre-2017 bonds or equity issued by PdVSA. The ban on trading in the primary Venezuelan market remains in place.

Implications

While Venezuela has not been subject to a comprehensive U.S. economic sanctions regime like those in place against Iran and Syria, the economic sanctions have been sufficiently broad to make it a challenging market for U.S. companies. Restrictions that remain in place include a broad prohibition on transactions with the Government of Venezuela and state-owned entities, as well as a prohibition on dealings with many of Venezuela’s larger banks.

This targeted suspension of sanctions on Venezuela, provides a hopeful precedent for the lifting of other economic sanctions currently in effect against Venezuela.  

But making these economic sanctions easing measures permanent and any additional future easing of other economic sanctions measures will be conditional on the Maduro regime implementing its commitments under the electoral roadmap. Failure to abide by such commitments is likely to result in the reimposition of these economic sanctions, most notably those on the oil and gas sector, which are only subject to a six-month general license. Accordingly, U.S. companies now authorized to engage in transactions in Venezuela with PdVSA should be mindful of the risk of business dealings that have a time horizon longer than April 18, 2024. If the Maduro regime honors its commitments, the PdVSA-related General Licenses will be extended, and other economic sanctions easing could follow. 

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Greta L. Nightingale, an O’Melveny partner licensed to practice law in the District of Columbia, and David J. Ribner, an O’Melveny counsel licensed to practice law in the District of Columbia and New York, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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