Yesterday the Office of Foreign Assets Control (“OFAC”) announced that it had extracted $304,706 from Halliburton Atlantic Limited and Halliburton Oversea Limited in connection with unlicensed exports of $1,189,752 in goods and services by those companies to the joint venture granted the concession to the Cabinda Onshore South Block in Angola.
Wait, you ask, did the U.S. reimpose sanctions on Angola while I was not looking? Nope. The problem here was that Unión Cuba-Petróleo (CUPET) owns a whopping 5% interest in the joint venture at issue.
Wait, you ask again, did OFAC suddenly get rid of the 50% rule? I thought you didn’t have to worry about interests held by blocked parties less than 50 percent, individually or in the aggregate. You don’t normally, but the Cuba rules are different. Section 515.201 of the Cuban Assets Control Regulations prohibit any dealings in property in which any Cuban “has at any time on or since the effective date of this section had [sic] any interest of any nature whatsoever, direct or indirect.”
So, since CUPET had a five percent interest in the joint venture, exports of goods and services to it were illegal. Further, those exports would have been illegal if CUPET had only a 0.0001% interest in the joint venture because the regulation covers “any” interest. And they would have been illegal if Cuba had a 0.0001% interest in an Angolan company that had a 0.0001% interest because the regulation covers “any interest … direct or indirect.” Worse, the exports would have been illegal if CUPET had divested its 0.0001% interest in the Angolan company with a 0.0001% interest in the joint venture ten years before the exports. That would be because the regulation covers property in which a Cuban “has” or “had” any interest. One might be able to seek refuge in the ungrammatical peculiarities of “has at any time on or since the effective date of this section had [sic] any interest of any nature whatsoever, direct or indirect” — read it carefully — but I wouldn’t count on it.
In theory, the breadth of this regulation imposes a nearly impossible task on any exporter, requiring the exporter to ferret out any remote Cuban abuela or abuelo hiding behind a potted palm somewhere before exporting anything, particularly given that violations of OFAC rules do not require knowledge. In this case, OFAC noted that Halliburton had been supplied documents showing the Cuban interest, but this was not the basis for liability here but instead an “aggravating factor,” suggesting that OFAC would have fined Halliburton even if had not known of CUPET’s paltry, non-controlling interest in the joint venture.
You have to wonder whether the federal employees who run OFAC have ever worked outside the government and have even the slightest conception of the real impact of requiring businesses to confirm that there is no Cuban interest, past or present, of any size whatsoever, in any foreign customer before exporting goods or services to that customer.