As tensions mount in the run-up to the election of a National Constituent Assembly in Venezuela on July 30, 2017, the United States Treasury Department Office of Foreign Assets Control ("OFAC"), on July 26, 2017, imposed sanctions on an additional 13 current or former Venezuelan government officials.
These designations under Executive Order 136921 take effect immediately. As a result, US Persons2 are now prohibited from engaging in any commercial transaction with any of the 13 individuals, direct or indirect. This prohibition also extends to any entity in which the designated individual, or a combination of designated individuals, owns a 50 percent or greater interest, or which OFAC determines to be under the control of a designated person. The sanctions also require US Persons to block (freeze) any property or interest in property of a designated person within the possession or control of a US Person.
Nine of the sanctioned individuals appear to be current or former Venezuelan government officials. In announcing the sanctions, OFAC said that it is targeting the other four of the thirteen individuals because they are current or former officials of two Venezuelan government entities that are "engines of corruption":
- Petroleos de Venezuela, S.A. (PDVSA), the state-owned oil company and ultimate parent of CITGO, the Houston, TX-based energy company; and
- The National Center for Foreign Commerce (Centro Nacional de Comercio Exterior or CENCOEX), which sets the official exchange rate for Venezuelan currency transactions.
The four sanctioned individuals identified as having connections with PDVSA, CENOCEX and other organizations, are:
- Simon Alejandro Zerpa Delgado, PDVSA Vice President of Finance, President of Venezuela’s Economic and Social Development Bank (BANDES) and President of Venezuela’s National Development Fund (FONDEN).
- Carlos Erik Malpica Flores, former National Treasurer and former Vice President of Finance for PDVSA.
- Rocco Albisinni Serrano, President of CENCOEX.
- Alejandro Antonio Fleming Cabrera, Vice Minister for Europe of Venezuela’s Ministry of Foreign Affairs and the former President of CENCOEX.
While the sanctions do not target PDVSA (or CITGO) or CENCOEX as entities, they could nevertheless have a potentially significant impact on them. This is because OFAC prohibits US Persons from engaging in commercial transactions with designated individuals, even when those individuals are acting for or on behalf of a non-designated company. Accordingly, without a license from OFAC, US Persons could not engage in transactions with PDVSA or CENCOEX if such transactions involve one of the designated persons. Based on OFAC’s past guidance and enforcement actions, this means, for example, that a US Person could not sign a deal with PDVSA or CENCOEX if the designated person were the signatory.
While the July 26, 2017 sanctions are limited to individuals, it remains to be seen whether the US will impose additional or more expansive measures in advance of, or after, any National Constituent Assembly election. In OFAC's announcement of the 13 individual designations, Treasury Secretary Steven Mnuchin indicated that anyone elected to the National Constituent Assembly could be exposed to US sanctions. But the US has not as yet provided public guidance on whether further measures, such as sectoral or country-based sanctions, might also be under consideration.
Accordingly, active monitoring of the policy landscape remains critical. In particular, in light of the affiliations of several of the new specifically designated nationals, or SDNs, it will be important to assess commercial or contractual relationships with PDVSA and CENOCEX to ensure that appropriate safeguards are in place to ring-fence any involvement by the designated persons.
Click here for the names of all 13 designated individuals.