OFAC suspends select Venezuela-related sanctions

On October 18, 2023, the US Department of the Treasury's Office of Foreign Assets Control (OFAC) eased restrictions on Venezuela by suspending certain sanctions measures on (i) Venezuela's oil and gas sector operations; (ii) the gold sector of the Venezuelan economy; and (iii) US person purchases in the secondary market of certain Venezuela sovereign bonds and equity.

These measures, which represent broad relief for companies in these sectors, are taken in response to the signing of an electoral map agreement between the Venezuelan government and the opposition political alliance. OFAC cautioned that it is prepared to revoke these authorizations, if appropriate, to support US foreign policy and national security priorities. In connection with these measures, OFAC issued several new and amended general licenses, FAQs and a related FAQ document.

The United States has maintained targeted sanctions related to Venezuela for over 17 years, with more stringent sanctions being imposed in the past five years in response to the contested elections and human rights violations in the country. For example, Executive Order (E.O.) 13850 (November 2018) set out a framework to block the assets of, and prohibit certain transactions with, any person determined by the Secretary of the Treasury to operate in certain sectors of the Venezuelan economy, including the gold and oil and gas sectors, or to engage in corrupt transactions with the Maduro government. E.O. 13808 (August 2017) and E.O. 13835 (May 2018) prohibit certain dealings in new debt or new equity or other financial transactions involving the Government of Venezuela and the Venezuelan state-owned oil and gas company. E.O. 13827 prohibits certain digital currency dealings involving the Government of Venezuela.

OFAC's suspension of certain of these Venezuelan sanctions was accomplished through the issuance of general licenses. Of particular interest to US companies, GL 44 temporarily authorizes, for an initial period of six months (expiring on April 18, 2024), all transactions related to oil and gas sector operations in Venezuela, including transactions with the Venezuelan state-owned oil and gas company, subject to certain conditions. Included within the authorization is the sale of oil and gas from Venezuela to the United States and other jurisdictions, as well as the payment of taxes, royalties, costs, fees, dividends and profits related to oil and gas sector operations or transactions involving the Venezuelan state-owned oil and gas company.

While expiring on April 18, 2024, these restrictions will be potentially renewed if the Venezuelan government follows through with their commitments and continues to take concrete steps toward a democratic election by the end of 2024.

Additional general licenses authorize the following:

• GL 43, authorizing certain transactions involving the Venezuelan state-owned mining company designated pursuant to E.O. 13850, accompanied by guidance that the US government does not intend to sanction any person solely for operating in the gold sector of the Venezuelan economy;
• GL 3I and GL 9H, removing the secondary market trading bans on purchases of certain Venezuelan sovereign bonds and pre-2017 bonds or equity issued by Venezuela's state-owned oil company.

The new and amended GLs published by OFAC will, in many circumstances, allow companies who ceased or limited their operations due to the Venezuela-related sanctions to now restart or expand them. While the authorizations are broad, certain limitations remain including (i) restrictions on transactions with prohibited financial institutions; (ii) transactions involving entities in Russia with significant ties to Russia; and (iii) certain transactions involving prohibited new debt that do not relate to the sale of oil and gas. More details regarding the allowances and limitations of GLs can be found in the FAQ sheet published by OFAC.

The GLs present opportunities for business, but not without risk. Although these authorizations provide relief from sanctions and allow many activities in the oil, gas and gold sectors, companies should be aware that these authorizations can be revoked at any time. Importantly, all other restrictions imposed by the United States on Venezuela remain in place (including, but not limited to, the prohibitions noted above). Any companies beginning to engage or choosing to re-engage in transactions in, or involving, Venezuela should ensure that all agreements include appropriate representations, warranties and termination clauses and that all compliance policies and procedures incorporate risk-based frameworks that consider these circumstances.

Our team will continue to monitor and publish additional updates on the Venezuelan sanctions as appropriate.