On 8 March 2015, President Obama signed Executive Order 13692 (the Order) imposing targeted sanctions against persons in Venezuela. This is the first Executive Order issued pursuant to the Venezuela Defense of Human Rights and Civil Society Act of 2014 (Pub. L. 113-278), which President Obama signed into law on 18 December 2014.
The sanctions do not target the geographic territory or the economy of Venezuela. Neither Venezuela as a whole nor the Venezuelan oil industry is subject to sanctions. They do prohibit transactions with certain designated persons, but do not impose a blanket designation on the government of Venezuela or Venezuelan officials. This action reflects the continued trend of the U.S. government to utilize tailored measures to penalize actors for foreign policy reasons.
Following the issuance of the Order, Treasury Secretary Jack Lew issued a statement emphasizing that the Treasury will continue to use sanctions to target individuals in Venezuela involved in human rights violations and public corruption. State Department spokesperson Jen Psaki likewise emphasized during her daily press briefing that the Order does not change the diplomatic relationship between the United States and Venezuela, nor does it impose any travel or business restrictions other than on those specific individuals named in the Order. She also denied that the Order was a response to President Maduro’s criticisms of U.S. policy, and denied that the ongoing dispute with the Venezuelan government over the number of U.S. diplomats on the ground in Venezuela played a role in the issuance of the Order.
Finally, in a background conference call, unnamed senior administration officials stated that in terms of “the impact that [the Order] may have [on the] energy sector or the oil industry, there’s no direct effect from these sanctions.” Rather, the “point of these sanctions…is really to shine a light on the abuse of human rights or democratic practice or public corruption by certain individuals.”
Scope of the current restrictions under the Order
The Order requires U.S. persons to block property interests of designated persons when such property is within the United States or within the possession or control of U.S. persons. The Order also grants the legal authority for future designations of persons who engage in certain sanctionable activities. Additionally, the Order suspends entry into the United States by the individuals designated in the annex to the Order, as well as any alien determined by the Secretary of the Treasury to meet any of the criteria in the Order regarding human rights violations or public corruption. The list of persons designated in the Order is here.
Companies doing business in Venezuela should review their business activities to confirm that transactions do not involve persons or entities designated as a Specially Designated National (SDN). An entity in which an SDN has a 50 percent or greater interest is also blocked, regardless of whether it appears on an annex to an executive order or on the SDN list maintained by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC). OFAC also advises U.S. persons to act with caution when considering a transaction with a non-blocked entity in which a blocked person has a significant ownership interest, even though it is less than 50 percent.
This caution should extend to non-blocked entities over which blocked persons exercise control, but of which they do not own 50 percent or more. For example, OFAC has advised that U.S. persons may not engage in negotiations, enter into contracts, or process transactions involving a blocked individual when that blocked individual is acting on behalf of the non-blocked entity that he or she controls. Thus, if a blocked individual were the executive of a non-blocked entity, such as a corporation, U.S. persons would be prohibited from entering into a contract with that non-blocked entity if the contract were signed by the blocked individual.
Authority for future designations under the Order
The Order grants the Department of the Treasury the authority to designate persons determined to be responsible for, or complicit in, or responsible for ordering, controlling, or otherwise directing, or to have participated in, directly or indirectly, any of the following in or in relation to Venezuela:
actions or policies that undermine democratic processes or institutions;
significant acts of violence or conduct that constitutes a serious abuse or violation of human rights, including against persons involved in antigovernment protests in Venezuela in or since February 2014;
actions that prohibit, limit, or penalize the exercise of freedom of expression or peaceful assembly; or
public corruption by senior officials within the government of Venezuela.
Specifically, the Department of the Treasury is authorized to designate persons determined:
- to be a current or former leader of an entity that has, or whose members have, engaged in any activity described above or of an entity whose property and interests in property are blocked pursuant to this order;
to be a current or former official of the government of Venezuela;
to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of:
a person whose property and interests in property are blocked pursuant to this order; or
an activity described above; and
to be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to this order.