In a significant escalation of economic pressure on Venezuela’s Maduro regime, President Trump issued an executive order on August 5 that blocks all Venezuelan government property in the United States or in the possession of U.S. persons.1 At the same time, the Office of Foreign Assets Control (OFAC) published a number of general licenses and exemptions, the net effect of which mean that, following a 30-day wind down period, it will essentially be unlawful for U.S. persons to deal in almost all property in which the Government of Venezuela or any of its agencies or instrumentalities have any interest.2 The full executive order is available here.
In addition to targeting the Venezuelan government's assets in the United States, the order directs the U.S. Treasury Department to block the assets of (i) anyone determined to have provided financial support, goods or services to any person on the list of Specially Designated Nationals and Blocked Persons (the SDN list) or (ii) anyone that has acted for or on behalf of any person whose property is blocked pursuant to the order. Accordingly, non-U.S. persons that provide material assistance, goods or services to an instrumentality of the Venezuelan government or to any entity in which the Government of Venezuela holds a 50 percent or greater interest could themselves be placed on the SDN list.
What the Executive Order Does Not Do
To be clear, the executive order does not impose a Cuba or Iran-style embargo on Venezuela. Transactions with private interests in Venezuela (that are not otherwise designated by OFAC) remain authorized. Moreover, in conjunction with the executive order, OFAC issued 13 general licenses that permit what would otherwise be prohibited conduct. Significant among these general licenses:
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General License 28 [here], referenced earlier, authorizes U.S. and non-U.S. persons presently engaged with the Government of Venezuela to wind down their operations by September 4, 2019. This means that goods in which the Venezuelan government has an interest that are in transit or already contracted for as of August 5 can be delivered until September 4. Other existing transactions can also continue until September 4, but no new contracts relating to the Government of Venezuela should be entered into. The general license does not authorize transactions with persons placed on the SDN list pursuant to other executive orders or sanctions programs.
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General License No. 30 [here], directed at ocean and air carriers, authorizes transactions ordinarily incident and necessary to operations or use of ports and airports in Venezuela. This means that payments to Venezuelan governmental entities will be authorized for port and airport services relating to lawful cargo moving to/from permissible shippers/consignees in Venezuela. Transactions with other persons on the SDN list remain prohibited.
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General License No. 33 [here] authorizes overflight payments, emergency landings, and air ambulance services (including medical evacuation from Venezuela) subject to certain restrictions further detailed in the General License.
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Additional general licenses will allow U.S. persons to continue transactions with Interim President Juan Guaido, the Venezuelan National Assembly, including its members and staff, and anyone appointed by the National Assembly or Guaido to act on behalf of the Government of Venezuela.3
Viewed in conjunction with the general licenses, the executive order falls short of imposing a full embargo on Venezuela. However, given the pervasiveness of the Maduro regime throughout the Venezuelan economy, it may be very difficult to discern which transactions are allowed and which are prohibited. We would encourage anyone interested in trading with or otherwise operating in Venezuela to carefully vet their Venezuelan counterparties and/or seek the advice of counsel.