On January 28, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced the designation of Venezuelan state-owned oil company Petróleos de Venezuela, S.A. (PdVSA) as a Specially Designated National (SDN). The designation was made pursuant to Executive Order (EO) 13850 (Blocking Property of Additional Persons Contributing to the Situation in Venezuela). That order initially applied only to the Venezuelan gold sector, but as part of the Treasury Department’s actions, Treasury Secretary Steven Mnuchin determined “that persons operating in Venezuela’s oil sector are subject to sanctions pursuant to E.O. 13850,” allowing for the designation of PdVSA.

As is the case with all SDNs, all property and interests in property of PdVSA in the possession or control of a US person or within the United States must be blocked and US persons are generally prohibited from dealing with the company. Such prohibitions also extend to entities owned 50% or greater by PdVSA. Given the sizable role that PdVSA and its subsidiaries play in the US economy and petroleum industry, OFAC issued 8 new general licenses (GLs) with the goal of limiting potential disruption from the designation.

While certain of the GLs facilitate the divestment or wind-down of transactions or dealings with PdVSA and its subsidiaries, others appear to create authorizations that are intended to be more indefinite. Among other things, the GLs authorize (subject to certain conditions) the importation of Venezuelan oil by US persons and the operation of CITGO – so long as payments for oil and any other funds that would normally go to PdVSA are placed into a blocked account. It is unclear whether PdVSA will continue to export oil under such conditions. In a White House press briefing, Secretary Mnuchin indicated that blocked funds may eventually be provided to the President of the Venezuelan National Assembly Juan Guaido, who the US recognizes as the current president of Venezuela.

The OFAC web notice also stated that “OFAC expects to publish in the near term new FAQs and update existing FAQs, in connection with today’s action and the issuance of these general licenses.” We expect these FAQs to clarify many of the outstanding questions with regard to the January 28 actions.