On April 17, 2024, the U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC”) announced that it would not renew an existing authorization for transactions related to oil and gas sector operations in Venezuela, and replaced the existing authorization with a 45-day wind-down period for previously authorized transactions, expiring May 31, 2024. On April 15, 2024, OFAC separately reissued a separate general license, continuing to extend prohibitions to execution on the PdVSA 2020 bond collateral.

Expiration of Oil and Gas Authorization

By way of background, OFAC administers sanctions targeting Venezuela that generally prohibit U.S. persons from engaging in any transactions or other dealings with or involving the Government of Venezuela (“GoV”), Petróleos de Venezuela, S.A., the Venezuelan state-owned oil and gas company (“PdVSA”), and entities owned 50% or greater or controlled by the GoV.  Despite these broad prohibitions, in response to the signing of an electoral roadmap agreement between Venezuela’s Unitary Platform and the Maduro regime, in October 2023, OFAC issued a number of general licenses (“GLs”) easing sanctions against Venezuela (previously summarized in our blog post here), including GL 44, which authorized transactions related to oil and gas sector operations in Venezuela that would otherwise be prohibited under U.S. sanctions against Venezuela (e.g., dealings with or relating to the GoV or PdVSA) for a six-month period ending April 18, 2024, with renewal contingent on the Maduro regime’s commitment to electoral integrity. 

In the afternoon on April 17, 2024 and in advance of the April 18 expiration of GL 44, OFAC, replaced and superseded GL 44 with new GL 44A, which authorizes all transactions that are ordinarily incident and necessary to the wind down of any transactions related to oil or gas sector operations in Venezuela that were previously authorized by Venezuela GL 44 by May 31, 2024.  Formally speaking, GL 44 is no longer in effect (a State Department press statement provides that the existing authorization continued through 12:01 AM on April 18 as previously scheduled).  Contrary to certain earlier reports that the Biden administration was considering grandfathering the authorization for existing activities or authorizing certain specified activities, GL 44A instead resembles a standard wind down authorization. 

Notably, however, Biden administration press statements indicate that the action on GL 44 “should not be viewed as a final decision that we no longer believe Venezuela can hold competitive and inclusive elections” and that the administration would continue to engage with all stakeholders, including representatives of the Maduro regime.  In addition, OFAC guidance and statements by Biden administration officials indicate that OFAC will consider specific license requests for activities previously authorized by GL 44 “on a case-by-case basis” through consultation with the State Department.

Concurrent with GL 44A, OFAC issued a set of frequently asked questions (“the FAQs”) providing further guidance on GL44A.  In particular, the FAQs confirmed that GL 44A authorizes the wind down of transactions that were authorized by GL 44, including the following non-exhaustive list: (1) the production, lifting, sale, and exportation of oil or gas from Venezuela, and provision of related goods and services; (2) the payment of invoices for goods or services related to oil or gas sector operations in Venezuela; and (3) the delivery of oil and gas from Venezuela to creditors of the GoV, including creditors of entities in which PdVSA owns, directly or indirectly, a 50 percent or greater interest, for the purpose of debt repayment.

The FAQs also clarify that entering into new business, including new investment, that previously was authorized by GL 44 will not be considered wind-down activity and that U.S. persons unable to complete transactions previously authorized by GL 44 before May 31, 2024 are encouraged to seek guidance from OFAC.  Similarly, OFAC clarified that non-U.S. persons may wind down transactions or activity without exposure to sanctions, provided that such wind down activity is consistent with GL 44A. Non-U.S. persons unable to wind down such transactions or activity before May 31, 2024 are also encouraged to seek guidance from OFAC.

In separate FAQs, OFAC clarified that: (i) other authorizations related to Venezuela’s oil or gas sector operations, such as GL 8M, “Authorizing Transactions Involving Petróleos de Venezuela, S.A. (PdVSA) Necessary for the Limited Maintenance of Essential Operations in Venezuela or the Wind Down of Operations in Venezuela for Certain Entities,” and GL 41, “Authorizing Certain Transactions Related to Chevron Corporation’s Joint Ventures in Venezuela,” remain operative and are not affected by the revocation of GL 44; and (ii) GL 44A does not affect the U.S government’s posture on litigation brought by creditors seeking to attach assets of the GoV in the United States. 

Extension of Prohibitions to Execution on PdVSA 2020 Bond Collateral

In addition, on April 15, 2024, OFAC issued GL 5O, “Authorizing Certain Transactions Related to the Petróleos de Venezuela, S.A. 2020 8.5 Percent Bond on or After August 13, 2024.”  By way of background, Executive Order (“E.O.”) 13835 prohibits transactions related to the sale, transfer, assignment, or pledging as collateral by the GoV of any equity interest in an entity owned 50 percent or more by the GoV.  This applies to the CITGO shares that are collateral for the PdVSA 2020 bonds. 

GL 5 initially was issued in July 2018 and would disapply the E.O. 13835 prohibitions to execution on the PdVSA 2020 bond collateral.  GL 5 was replaced in October 2019 by GL 5A, which delayed the effectiveness of the authorization contained in the GL.  Since then, that delay in effectiveness has been extended without fail.  GL 5O is the latest extension, meaning that the E.O. 13835 prohibitions continue to apply to the PdVSA 2020 bond collateral absent a specific license.  Additional guidance on GL 5 and its successors is provided in OFAC FAQ 595.