President Imposes Additional Sanctions on Venezuelan Government in Wake of Election
HIGHLIGHTS:
- President Donald Trump has issued a new Executive Order expanding existing sanctions against the government of Venezuela and its instrumentalities, including the state-owned oil company, Petróleos de Venezuela (PdVSA).
- The action swiftly followed Venezuelan elections, viewed as a sham by the U.S. government.
- Additional sanctions are being considered by the United States.
The Trump Administration moved swiftly to impose new sanctions against the Venezuelan government following President Nicolas Maduro's re-election, which was viewed as a "sham" by senior U.S. officials. These sanctions, issued on May 21, 2018, build on prior sanctions targeting the Venezuelan government and government officials.
New Executive Order
President Donald Trump's new Executive Order on Venezuela prohibits U.S. persons from engaging in transactions related to, providing financing for or otherwise dealing in:
- the purchase of debt, including accounts receivable, owed to the government of Venezuela, including any political subdivision, agency or instrumentality thereof, including the Central Bank of Venezuela and the state-owned oil company, Petróleos de Venezuela (PdVSA)
- any debt to the government of Venezuela issued as collateral after May 21, 2018
- the sale, transfer, assignment or pledging as collateral by the government of Venezuela of any equity interest in any entity 50 percent or more owned by the government of Venezuela
This expands the scope of Executive Order 13808, issued in August 2017, which prohibited U.S. persons from extending credit, or "New Debt," to the government of Venezuela and its instrumentalities. Under the prior order, "New Debt" only included new transactions extending credit for more than 30 days to the government of Venezuela (90 days for PdVSA). The new sanctions have no maturity deadline and restrict certain transactions related to pre-existing debt obligations. We expect that the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) will issue guidance in the near future.
Prior Rounds of Sanctions
This move follows other actions by the United States, including designations of certain current or former Venezuelan government officials as Specially Designated Nationals (SDNs). Further, in March 2018, the United States prohibited U.S. persons from dealing in Venezuelan cryptocurrencies, issued by, for or on behalf of the government of Venezuela. These sanctions were issued in response to the Maduro regime's launch of a new cryptocurrency, the "Petro," intended to evade U.S. sanctions. (The Venezuelan Bolivar Fuerte, Venezuela's traditional currency, is not subject to this order.)
Potential Future Sanctions
In response to the Venezuelan elections held on May 20, 2018, the U.S. Department of State is contemplating additional sanctions, but it has not yet announced any specifics. The Trump Administration has also been rumored to be considering sanctions on Venezuelan oil exports, or on insurance related to oil exports, to pressure regime change. While there are no specifics yet, we believe that these sanctions would likely be "secondary" in nature (applying to activities by non-U.S. persons and where there is no U.S. nexus), as this would have a deeper impact. If and when the U.S. government imposes additional sanctions of this kind, we would expect the government to grant a wind-down period to reduce the disruption and economic impact on existing transactions.
For more information on how the additional Venezuela sanctions could affect your company specifically, contact members of Holland & Knight's International Trade Group, including Jonathan Epstein, Ron Oleynik and Barbara Efraim.
This alert provides a high-level initial overview and is not intended to be definitive advice with respect to any particular transaction.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.