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January 17, 2023: OFAC updates Venezuela GL 5, and amends the relevant FAQ

The new version of Venezuela General License 5 (5J) now has an effective date of April 20, 2023. And OFAC updated the corresponding Frequently Asked Question (#595):

595. What does Venezuela-related General License 5J authorize?

Answer

The President issued Executive Order (E.O.) 13835 on May 21, 2018.  Subsection 1(a)(iii) of E.O. 13835 prohibits U.S. persons from engaging in transactions related to the sale, transfer, assignment, or pledging as collateral by the Government of Venezuela (GOV) of any equity interest in an entity owned 50 percent or more by the GOV.  One effect of subsection 1(a)(iii) is to require authorization before U.S. persons may engage in certain transactions regarding any equity interest in an entity owned 50 percent or more by the GOV.  Subsequent to the issuance of E.O. 13835, OFAC received inquiries about how and whether subsection 1(a)(iii) of E.O. 13835 could affect the ability to enforce bondholder rights to the CITGO shares serving as collateral for the Petróleos de Venezuela, S.A. (PdVSA) 2020 8.5 percent bond.  OFAC issued General License (GL) 5 on July 19, 2018, which removed E.O. 13835 as an obstacle to holders of the PdVSA 2020 8.5 percent bond gaining access to their collateral.

General License 5 was replaced and superseded by General License 5A on October 24, 2019 with a delay in the effectiveness of the authorization in the general license.  Since that date, OFAC has extended the delay in effectiveness a number of times.  Most recently, OFAC issued General License 5J on January 17, 2023, which further delays the effectiveness of the authorization in GL 5 until April 20, 2023.  Between October 24, 2019 and April 20, 2023 (the date the authorization in General License 5J becomes effective), there is no authorization in effect that licenses against subsection 1(a)(iii) of E.O. 13835 applicable to the holders of the PdVSA 2020 8.5 percent bond.  As a result, during such period, transactions related to the sale or transfer of CITGO shares in connection with the PdVSA 2020 8.5 percent bond are prohibited, unless specifically authorized by OFAC.

To the extent an agreement may be reached on proposals to restructure or refinance payments due to the holders of the PdVSA 2020 8.5 percent bond, additional licensing requirements may apply.  OFAC would encourage parties to apply for a specific license and would have a favorable licensing policy toward such an agreement. 

Date Updated: January 17, 2023

Date Released

January 20, 2022

Amended Frequently Asked Question 595

Links:

OFAC Notice

General License 5J

Amended FAQ 595

Categories: Frequently Asked Questions (FAQ) Guidance Licenses OFAC Updates Venezuela sanctions

eric9to5

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