Web Alert: US Increase sanctions on Venezuela (Executive Order 13884)

On 5 August 2019 the US issued Executive Order (EO) 13884, entitled 'Blocking Property of the Government of Venezuela' which blocks the assets of the Government of Venezuela in the US or in the possession and control of any US person. In addition, US persons are essentially prohibited from engaging in any transactions with the Government of Venezuela, its agencies or any entity that it owns or controls. Furthermore, non-US persons may have their assets blocked in the US if they are considered to have materially assisted or supplied goods or services in support of the Venezuelan Government. The full text of the EO can be read in the attachment on the right.

We have previously issued a web alert which provides details regarding sanctions imposed on the Venezuelan state-owned oil company, Petroleos de Venezuela SA (PDVSA), which can be found in the link on the right.

On the 6 August 2019, the US Department of Foreign Assets Control (OFAC) amended twelve pre-existing general licences to confirm their applicability to the EO and issued thirteen new general licences to provide certain exemptions to its prohibitions. OFAC has also issued five new frequently asked questions, FAQs no.665-681, which are accessible here.

 
Impact on US Persons

The EO does not impose a full embargo against Venezuela but it will have a serious impact, as it will effectively stop any financial or commercial dealings by US Individuals or companies, directly or indirectly, with the Government of Venezuela. Members should be aware that the EO includes a broad definition of the Government of Venezuela which is, as follows:

'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 is 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.'

OFAC FAQ no. 680 clarifies that the above definition of the government of Venezuela expressly excludes the Venezuelan private sector. It does however confirm that it applies to any entity which the government of Venezuela owns, directly or indirectly a 50% or greater interest (which includes PdVSA) and provides that US persons are prohibited from engaging in transactions with entities 50% or more owned by the Venezuela government, even when they are not named on the US SDN list.

 
Impact on Non-US Persons

The EO also provides for the blocking of property of any person, including non-US persons, who are determined to have provided material assistance to, or goods or services in support of, the government of Venezuela, its agencies and any entity in which it holds a 50% or greater interest. Any individual who has contravened this provision, could itself be sanctioned and have its property in the US blocked. There is a risk that the provision of ocean transportation could be deemed to amount to either 'material assistance' or service in support of an entity whose property is blocked under the EO. Further details can be found in the client alert issued by Freehill Hogan & Mahar LLC which can be found in the attachment on the right.

Comment

From statements made by the US Government, it appears likely that EO will be broadly construed and aggressively enforced by OFAC in their increased attempt to combat the Maduro regime. Due to the punitive consequences of breaching this EO, members should proceed with extreme caution when considering whether to engage in any business which could be deemed providing material assistance or goods/services in support of the Government of Venezuela which includes PdVSA.

Members are strongly encouraged to carefully consider any trade to Venezuela and to conduct extensive due diligence including seeking legal advice, to ensure that they are not at risk of breaching sanctions. We recommend contacting your usual club contact who can assist if you have any queries, which includes providing recommendations regarding experienced sanctions lawyers.

カテゴリー: Sanctions