The U.S. Treasury ("Treasury") Department Office of Foreign Assets Control ("OFAC") sanctioned Petróleos de Venezuela, S.A. ("PdVSA"), the Venezuelan state-owned oil and natural gas company, pursuant to Executive Order ("EO") 13850.
The move comes less than a week after the United States recognized opposition politician Juan Guaidó as the interim leader of Venezuela. In general - and except as provided in the General Licenses described below - as of January 28, 2019, the property and interests in property of PdVSA and its majority-owned subsidiaries are blocked, and U.S. persons are prohibited from having dealings with them.
The action to designate PdVSA followed a determination made by Treasury Secretary Steven Mnuchin, in consultation with Secretary of State Michael Pompeo, that persons who operate in the oil sector of the Venezuelan economy may be subject to sanctions. While the addition of PdVSA to OFAC's Specially Designated Nationals and Blocked Persons List ("SDN List") imposes broad prohibitions on dealings with the Venezuelan state-owned oil company, OFAC simultaneously issued seven General Licenses that authorize certain transactions with PdVSA and its subsidiaries, including U.S.-based refiner and retailer CITGO Holding, Inc. ("CITGO") and its corporate parent, PDV Holding, Inc. ("PDVH").
Most importantly, General License 7 and General License 12 permit the continued importation into the United States of Venezuelan oil through April 28, 2019, provided that any payments to PdVSA or its majority-owned subsidiaries - other than CITGO and PDVH - be made into a blocked, interest-bearing account located in the United States. Because the U.S. government previously prohibited CITGO from transferring profits to PdVSA, the cumulative effect of the January 28 sanctions is to prevent Venezuelan oil profits earned in the United States from flowing back to PdVSA and, by extension, the regime of Nicolás Maduro.
Separately, President Donald J. Trump signed a new Executive Order expanding the definition of "Government of Venezuela" specifically to include PdVSA, as well as "persons that have acted, or have purported to act, on behalf of the Government of Venezuela, including members of the Maduro regime."
Commentary / James Treanor
The designation of PdVSA represents a significant escalation in U.S. sanctions against Venezuela and, according to Secretary Mnuchin, is a move intended to "help prevent further diverting of Venezuela's assets by Maduro and preserve these assets for the people of Venezuela." The web of General Licenses surrounding the PdVSA listing reflects the complexities and complications that arise when sanctions are imposed on a major international oil company. OFAC has promised that FAQs explaining these sanctions (and carve-outs) are forthcoming. They will be parsed closely when they arrive.
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