New U.S. Sanctions Targeting Venezuelan Government

Author:Gibson, Dunn & Crutcher
Profession:Gibson, Dunn & Crutcher
 
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On August 5, 2019, the Trump administration imposed new sanctions on the Government of Venezuela by freezing the property and assets of the regime of Venezuelan President Nicolás Maduro as well as those who provide it with "material support." Issued on the eve of a major international conference on the Venezuelan political crisis in Lima, Peru, the August 5 Executive Order was at first mistakenly characterized in some news reports as a complete "embargo" on Venezuela. In reality, this latest measure is more limited in scope, consisting of a set of sanctions against the Government of Venezuela—and not the country of Venezuela as a whole. Individuals and entities unaffiliated with the Government of Venezuela generally remain unsanctioned and transactions that have no nexus to the Venezuelan government generally remain unrestricted.

In terms of its direct impact, the Executive Order's reach is also blunted somewhat by the fact that Venezuela's most economically significant actor, the state-owned oil company Petróleos de Venezuela, S.A. ("PdVSA"), was already sanctioned earlier this year, as were Venezuela's central bank and several of the country's larger state-affiliated financial institutions. What this latest measure does is fill in the gaps to cover all remaining elements of the Government of Venezuela. As with the previously-imposed sanctions, however, exceptions abound. On August 6, 2019, the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC") issued 13 new general licenses and amended 12 previous general licenses to authorize U.S. persons to continue engaging in a range of narrowly defined transactions involving Venezuela's government. These exceptions are designed to mitigate the impact of U.S. sanctions on the Venezuelan opposition, civil society and multinational companies.

In our assessment, the principal significance of the Government of Venezuela being designated lies in the fact that many companies, and financial institutions in particular, are now likely to become even more reluctant to engage in transactions with any nexus at all to the country. While U.S. sanctions against Caracas are still not nearly as broad as those targeting several other countries, we expect thatat least over the near termmany parties will apply to Venezuela-related transactions the same level of scrutiny and concern typically reserved for dealings with Cuba and other comprehensively sanctioned jurisdictions. In fact, the designation of the Government of Venezuela may turn out to be of limited practical significance since so many companies and financial institutions have already made the decision to withdraw from the country...

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