On January 28, 2019, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) designated the Venezuelan state oil company, Petrleos de Venezuela (PdVSA), as a Specially Designated National (SDN). While PdVSA had previously been subject to targeted sanctions related to capital markets and financing, effective immediately it is a fully sanctioned entity and U.S. persons are prohibited from engaging in transactions with PdVSA or in which PdVSA has an interest. Under OFAC's 50% Rule, these sanctions apply equally to any entities 50% or greater owned by PdVSA. However, OFAC also issued eight related general licenses to mitigate the effects of the PdVSA designation on U.S. businesses, including temporary authorizations related to petroleum imports and CITGO operations.

Secretary of the Treasury Steven T. Mnuchin stated in a press release that PdVSA is considered a mechanism of corruption in Venezuela. The Trump administration considers President Maduro's election victory in the May 2018 presidential election to be invalid, and the United States recently recognized Juan Guaid as Interim President. Secretary Mnuchin stated that the sanctions could be lifted if control of PdVSA is transferred to the Interim President or a new democratically elected government. These sanctions are the latest in a series of measures to economically pressure the Maduro regime and effect political change in Venezuela. In particular, these sanctions are estimated to block $7 billion of PdVSA assets from use by the Maduro regime, and restrict billions more in PdVSA oil exports, which are one of Venezuela's main sources of revenue.

Many U.S. companies conduct business with PdVSA and its subsidiaries. They may be affected by the sanctions against PdVSA, and should review their operations for potential exposure.

OFAC has issued the following eight new general licenses pertaining to the placement of PdVSA on the SDN list:

General License 7: Authorizes transactions and activities involving PDV Holding, Inc. (PDVH) and CITGO Holding, Inc. or any of their subsidiaries, until July 27, 2019; authorizes PDVH and CITGO to engage in transactions and activities incident and necessary to the purchase and importation of petroleum products from PdVSA until April 28, 2019.

General License 8: Authorizes Chevron, Halliburton, Schlumberger, Baker Hughes, and Weatherford to conduct business with PdVSA until July 27, 2019.

General License 9: Authorizes transactions relating to dealings in debt of PdVSA issued prior to August 25, 2017, including the transfer of such debt to non-U.S. persons.

General License 10: Authorizes U.S. persons in Venezuela to purchase gas from PdVSA.

General License 11: Allows U.S. person employees and contractors of non-U.S. entities outside of Venezuela and the United States to wind-down or maintain operations, contracts, or other agreements with PdVSA in effect prior to January 28, 2019, until March 29, 2019; authorizes U.S. financial institutions to reject (rather than block) U-turn funds transfers involving PdVSA and nonU.S. entities, until March 29, 2019.

General License 12: Authorizes transactions and activities related to the purchase and importation into the United States of petroleum and petroleum products from PdVSA until April 28, 2019; authorizes transactions and activities for the wind-down of operations, contracts, or other agreements involving PdVSA in effect prior to January 28, 2019, including imports into the United States of non-petroleum products, until February 27, 2019.

General License 13: Authorizes transactions and activities if the only PdVSA entities involved are Nynas AB or its subsidiaries, until July 27, 2019.

General License 14: Authorizes all transactions for the conduct of the official business of the United States Government by employees, grantees, or contractors.

OFAC has afforded a wind-down safe harbor in multiple of these general licenses. In the past, when a wind-down general license is published alongside new sanctions, the period has generally not been extended. Accordingly, U.S. companies that do business with PdVSA should take immediate action to determine whether winding down contracts or agreements, or taking other action to reduce exposure to PdVSA, under the relevant general license is appropriate for their business. If you have any questions regarding the Venezuela sanctions program or how it may affect your business, please reach out to the contacts listed below.