Reed Smith Client Alerts

On Monday January 28, following statements made by Secretary of the Treasury Steven Mnuchin regarding the United States’ effort to “[hold] accountable those responsible for Venezuela’s rapid decline,” the U.S. Department of Treasury, Office of Foreign Assets Control (“OFAC”) designated Petróleos de Venezuela, S.A. (“PdVSA”) pursuant to Executive Order (“E.O.”) 13850 for operating in the oil sector of the Venezuelan economy. As a result of this action, U.S. persons are prohibited from engaging in virtually all transactions with PdVSA. Additionally, all property and interests in property of PdVSA that are subject to U.S. jurisdiction are blocked. Pursuant to OFAC’s 50% Rule, these sanctions apply to any entity in which PdVSA owns, directly or indirectly, a 50 percent or greater interest.

OFAC’s designation of PdVSA comes less than a week after U.S. President Donald Trump recognized Juan Guaido, Venezuelan’s opposition leader, as the nation’s legitimate president. Upon announcing the new sanctions, Secretary Mnuchin indicated that the United States does not intend for these sanctions to be permanent but rather,  “[t]he path to sanctions relief for PdVSA is through the expeditious transfer of control to the Interim President [Juan Guaido] or a subsequent, democratically elected government.”

In conjunction with the imposition of these sanctions on PdVSA, OFAC issued and amended a number of general licenses authorizing a limited number of transactions and wind-down activities involving PdVSA. OFAC issued or amended the following general licenses:

  • General License 3: “Authorizing Transactions Related to, Provisions of Financing for, and Other Dealings in Certain Bonds”
  • General License 7: “Authorizing Certain Activities with PDV Holding, Inc. and CITGO Holding, Inc.”
  • General License 8: “Authorizing Transactions Involving Petróleos de Venezuela, S.A. (PdVSA) Prohibited by Executive Order 13850 for Certain Entities Operating in Venezuela”
  • General License 9: “Authorizing Transactions Related to Dealings in Certain Debt”
  • General License 10: “Authorizing the Purchase in Venezuela of Gasoline from Petróleos de Venezuela, S.A. (PdVSA)”
  • General License 11: “Authorizing Certain Activities Necessary to Maintenance or Wind Down of Operations or Existing Contracts with Petróleos de Venezuela, S.A. (PdVSA)”
  • General License 12: “Authorizing Certain Activities Necessary to Wind Down of Operations or Existing Contracts with Petróleos de Venezuela, S.A. (PdVSA)”
  • General License 13: “Authorizing Certain Activities Involving Nynas AB”
  • General License 14: “Official Business of the United States Government”