The Biden administration suspended certain sanctions on the Government of Venezuela, including some impacting Petróleos de Venezuela S.A. (PdVSA), on October 18, 2023. This significant, albeit currently temporary, change in the sanctions program follows the signing of an electoral roadmap agreement between the Maduro government and Venezuela’s Unitary Platform, the opposition coalition.

The US Office of Foreign Assets Control’s (OFAC’s) Venezuela-Related Sanctions program began in 2015 with the signing of Executive Order (EO) 13692 by US President Barack Obama. The EO, which implemented the Venezuela Defense of Human Rights and Civil Society Act of 2014, targets specific persons and entities determined to be responsible for certain malign activities, including those that undermine Venezuelan democratic processes or institutions.

The sanctions program peaked in August 2019 with US President Donald Trump’s “maximum pressure” approach, which saw the signing of EO 13884, imposing blocking sanctions on the Government of Venezuela.[1] EO 13884 built on several other EOs including EO 13850, which placed sanctions on the oil sector and PdVSA, and EO 13808, which imposed restrictions on transactions with Venezuelan debt, bonds, and other securities. Many of the sanctions were applicable to non-US persons, including those on certain Government of Venezuela entities, including PdVSA, and the oil and gold sector.

The current suspension of the sanctions occurred through the issuance of three new general licenses (GLs) and the amendment of three existing GLs. In conjunction with those GLs, OFAC issued a guidance document and two new FAQs and amended four existing FAQS.

NEW GENERAL LICENSES

The three new GLs consist of the following:

• GL 43: GL 43 authorizes all transactions involving CVG Compania General de Mineria de Venezuela CA (Minerven), Venezuela’s state-owned gold mining company, that are otherwise prohibited by EO 13850 or 13884, as those EOs have been incorporated into the Venezuelan Sanctions Regulations (VSR). OFAC also issued guidance that it does not intend to sanction any person solely for operating in the gold sector, despite such sanctions being authorized by EO 13850.
• GL 44: Currently active until April 18, 2024, GL 44 authorizes all transactions otherwise prohibited by the VSR, including transactions with PdVSA that are related to the oil or gas sector operations in Venezuela. The authorizations include, among other things, (1) the production, lifting, sale, and exportation of oil or gas from Venezuela and (2) the delivery of oil and gas from Venezuela to creditors for the purpose of debt repayment. GL 44 does not unblock the property and interests in property of PdVSA.
• GL 45: GL 45 authorizes all transactions involving Consorcio Venezolano de Industrias Aeronáuticas y Servicios Aéreos, S.A. that are otherwise prohibited by EO 13850 and 13884, each as incorporated into the VSR, that are incident and necessary to the repatriation of Venezuelan nationals from non-US jurisdictions in the Western Hemisphere to Venezuela, where those transactions are exclusively for the purposes of such repatriation.

AMENDED GENERAL LICENSES

OFAC amended three GLs as follows:

• GL 3I: GL 3I, which replaces and supersedes GL 3H, authorizes US persons to engage in all transactions related to the provision of financing for, and other dealings in, the bonds specified in the Annex to GL 3I that would otherwise be prohibited by Section 1(a)(iii) of EO 13808 or by EO 13850, as each of those have been incorporated into the VSR. Combined with GL 9H, discussed below, this removes the secondary market trading ban on certain Venezuelan sovereign bonds and pre-2017 bonds or equity issued by PdVSA. OFAC FAQ 1136.
• GL 9H: GL 9H, which replaces and supersedes GL 9G, authorizes US persons to engage in all transactions prohibited by Section 1(a)(iii) of EO 13808 or by EO 13850, as incorporated into the VSR, that are ordinarily incident and necessary to dealings in any debt of or equity in PdVSA that was issued prior to August 25, 2017. This includes bonds issued by PDV Holding, Inc. and CITGO Holding, Inc. or any of their subsidiaries. OFAC FAQ 1136.
• GL 5M: GL 5M continues the moratorium on and further delays the effectiveness of the authorization until January 18, 2024. Until then, transactions related to the sale or transfer of CITGO shares in connection with the PdVSA 2020 8.5% bond are prohibited unless specifically authorized. OFAC FAQ 595.[2]

NEXT STEPS

Importantly, OFAC has made clear that this sanctions relief is contingent on the Maduro regime upholding its obligations under the electoral roadmap. For example, the United States expects the Maduro government to define a specific timeline and process for the expedited treatment of all candidates before the end of November 2023. The United States also expects the Maduro regime to begin the release of wrongfully detained political prisoners.

These actions are preliminary to the actual conduct of free and fair elections in Venezuela, and presumably the Biden administration will require continued progress and adherence to such elections as a condition for continuing the relief or any further easing of sanctions. Without adherence to these commitments, OFAC is “prepared to revoke these authorizations.”

With the exception of the limited sanctions imposed through EO 13692, the Venezuela-Related Sanctions program has been implemented through executive action and, accordingly, the US Congress’s current ability to restrict or slow the lifting of sanctions is limited.

To bridge the gap, just a day before the suspension of the sanctions was announced, Florida Senator Marco Rubio introduced a bill (S. 3053), the Preempting Misguided Appeasement and Financing of Stabilizing Regimes Act of 2023, seeking to give Congress a role in any future decision to lift Venezuelan sanctions. If it becomes law, the bill would prohibit the importation of Venezuelan (and Iranian) crude oil, petroleum, petroleum products, and liquified natural gas into the United States.

The seven co-sponsors of Senator Rubio’s bill insist that it is integral to national security. The sponsors emphasize the importance of American energy independence, particularly from Venezuela and Iran. The senators also commended this proposed bill as a long-overdue step toward bolstering growth in domestic oil production and energy-sector jobs.

Finally, they made clear the bill’s intention to formalize the exclusion of certain countries from critical US supply chains and thereby strengthen the security of American energy infrastructure. Nevertheless, passing such legislation will likely be an uphill battle given the split control of Congress, the narrow majorities, and the logjam of upcoming “must-pass” legislation.

[1] EO 13884 defined the “Government of Venezuela” to mean “the state and Government of Venezuela[;] any political subdivision, agency, or instrumentality thereof, including the Central Bank of Venezuela and Petroleos de Venezuela, S.A. (PdVSA)[;] any person owned or controlled, directly or indirectly, by the foregoing[;] and any person who has acted or purported to act directly or indirectly for or on behalf of, any of the foregoing, including as a member of the Maduro regime.”

[2] OFAC simultaneously made clear that these actions are not meant to affect its posture on creditor litigation relating to the Government of Venezuela, citing FAQs 808, 1123, and 1124.

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