The United States has made the decision to partially lift sanctions on Venezuela, following the resumption of negotiations between the government led by Nicolas Maduro and the opposition Unitary Platform. This development takes the form of various General Licences, with specific conditions and exceptions:
General Licence 44:
This licence, valid until April 18, 2024, allows transactions in Venezuela’s oil and gas sector, which were previously prohibited under the Venezuela Sanctions Regulations. It covers activities related to the oil and gas sector in Venezuela, involving the state oil company, Petroleos de Venezuela, S.A. (PdVSA), and its subsidiaries with a direct or indirect ownership interest of 50% or more. Examples of permitted transactions include the production, sale, and exportation of oil or gas, payment of related invoices, new investments, and delivery of oil and gas for debt repayment.
Additionally, the licence permits associated and necessary transactions with certain Venezuelan banks, including the Central Bank of Venezuela and Banco de Venezuela SA Banco Universal.
However, it’s essential to note that General Licence 44 does not authorize transactions with specific other sanctioned Venezuelan banks, dealings with entities in Venezuela connected to Russia, or transactions related to new Russian investment in Venezuela’s oil or gas sector. Certain financial, debt, currency, and equity transactions prohibited by U.S. Presidential Executive Orders are also not allowed, along with unblocking any property blocked under the Venezuela Sanctions Regulations.
General Licence 43:
This licence allows dealings with Venezuela’s national gold mining company, Minerven, and its subsidiaries with a 50% or greater ownership interest, which were previously prohibited. The U.S. Office of Foreign Assets Control (OFAC) has clarified that it does not intend to target individuals solely for operating in Venezuela’s gold sector.
General Licences 3I and 9H:
These licences remove the ban on secondary trading of specific Venezuelan sovereign bonds and certain pre-25 August 2017 debt and equity of PdVSA and its subsidiaries with a 50% or greater ownership interest. While secondary trading is permitted, primary trading restrictions remain in place.
Commentary:
This partial easing of sanctions comes at a time when global oil supplies have faced challenges due to Russia’s invasion of Ukraine. It builds upon the earlier issuance of General Licence 41, allowing Chevron Corporation to resume limited natural resource extractions in Venezuela through joint ventures.
Notably, General Licence 44, which permits transactions in Venezuela’s oil and gas sector, has a six-month duration. Its renewal and continued existence seem contingent on the Maduro government fulfilling commitments and taking tangible steps towards a democratic election by the end of 2024.
However, recent developments raise concerns about the government’s commitment to these objectives. The opposition’s primary to select a candidate to run against Maduro resulted in a victory for Maria Corina Machado, who has been banned by the government. Maduro has alleged fraud in the poll and declared it illegal, opening a criminal investigation.
Due to potential uncertainties, it is advisable for stakeholders engaging in licensed transactions to exercise caution and seek legal guidance on appropriate safeguards in case these licenses expire or are revoked.
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