OFAC Venezuela Sanctions FAQ: Questions 1 and 2

 

For purposes of Executive Order (E.O.) of August 24, 2017, “Imposing Additional Sanctions with Respect to the Situation in Venezuela,” is Petroleos de Venezuela, S.A. (PdVSA) considered part of the Government of Venezuela?

Yes. Prohibitions on dealing in new debt vary based on whether the entity involved is PdVSA or another part of the Government of Venezuela. Subsection 1 (a)(i) of E.O. of August 24, 2017 prohibits engaging in transactions related to, providing financing for, or otherwise dealing in debt if (1) that debt is issued on or after the sanctions effective date (“new debt”); (2) has a maturity of longer than 90 days; and (3) is issued by, on behalf of, or for the benefit of PdVSA, its property, or its interests in property. Subsection 1 (a)(ii) of E.O. of August 24, 2017 prohibits engaging in transactions related to, providing financing for, or otherwise dealing in new debt with a maturity of longer than 30 days issued by, on behalf of, or for the benefit of any other segment of the Government of Venezuela, its property, or its interests in property. Subsection 1(a)(ii) of E.O. of August 24, 2017 further prohibits engaging in transactions related to, providing financing for, or otherwise dealing in equity issued on or after the sanctions effective date (“new equity”) by, on behalf of, or for the benefit of the Government of Venezuela, its property, or its interests in property, which includes PdVSA.

What do the prohibitions in E.O. of August 24, 2017 mean? Are they blocking actions?

Subsection 1(a)(i) of E.O. of August 24, 2017 prohibits engaging in transactions related to, providing financing for, or otherwise dealing in new debt with a maturity of longer than 90 days by, on behalf of, or for the benefit of PdVSA, its property, or its interests in property.

Subsection 1(a)(ii) of E.O. of August 24, 2017 prohibits engaging in transactions related to, providing financing for, or otherwise dealing in new debt with a maturity of longer than 30 days issued by, on behalf of, or for the benefit of any other segment of the Government of Venezuela, its property, or its interests in property. That subsection further prohibits engaging in transactions related to, providing financing for, or otherwise dealing in new equity issued by, on behalf of, or for the benefit of the Government of Venezuela, its property, or its interests in property, which includes PdVSA.

Subsection 1(a)(iii) of E.O. of August 24, 2017 prohibits engaging in transactions involving bonds issued by the Government of Venezuela prior to the order’s effective date.

Subsection 1(a)(iv) of E.O. of August 24, 2017 prohibits engaging in transactions involving dividend payments or other distributions of profits to the Government of Venezuela by any entity owned or controlled, directly or indirectly, by the Government of Venezuela.

Section 1(b) of E.O. of August 24, 2017 prohibits purchasing any securities from the Government of Venezuela other than securities qualifying as new debt with a maturity of less than or equal to 90 days (for PdVSA) or 30 days (for the rest of the Government of Venezuela).

These actions prohibit transactions by U.S. persons as defined in E.O. of August 24, 2017, wherever they are located, and transactions within the United States. This action does not require U.S. persons to block the property or interests in property of the Government of Venezuela, and the Government of Venezuela will not be added to the List of Specially Designated Nationals and Blocked Persons (SDN List). U.S. persons should reject transactions or dealings that are prohibited by E.O. of August 24, 2017, and to the extent required by Section 501.604 of the Reporting, Procedures and Penalties Regulations (31 C.F.R. part 501), U.S. persons must report to OFAC any rejected transactions within 10 business days.

 

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