Can You Sell Venezuelan-Origin Oil Now? Try Our Checklist and See!

On January 29, the Office of Foreign Assets Control (OFAC) took its first steps to loosen the sanctions against Venezuela following the capture and removal of Nicolás Maduro at the beginning of January.

On

With the issuance of General License 46 under the Venezuelan Sanctions Regulations, OFAC provides authorization for “established U.S. entities” to engage in certain transactions related to Venezuelan-origin oil. 

Scope of the License

The covered activities are limited to those ordinarily incident and necessary to the lifting, export, reexport, sale, resale, supply, storage, marketing, purchase, delivery, or transportation of Venezuelan-origin oil. The general license specifically states that the authorized activities include the refining of Venezuelan-origin oil, arranging shipping and logistics services, chartering vessels, obtaining marine insurance and protection and indemnity coverage, and arranging port and terminal services. Consistent with OFAC’s long-standing interpretation of its “including” clauses, we interpret this list to be illustrative and not exclusive.

Although the general license refers to “the lifting” of Venezuelan-origin oil, it is unclear whether the term refers to loading the crude oil from the storage terminal onto a transport vessel or the bringing up of oil from underground. If it refers only to loading, the general license does not appear to cover, for now, the supply of products and services that will be needed to fix and modernize the drilling and production of Venezuelan crude oil as opposed to its refining. We hope OFAC will publish an FAQ clarifying this ambiguity. 

‘Established’ US Entities

The transaction must be conducted by an established US entity (defined as an entity organized under the laws of the United States or any jurisdiction within the United States on or before January 29, 2025). We suspect this is to avoid having non-US persons form new US entities to take advantage of this license. Where does this leave non-US persons who want to trade in Venezuelan-origin oil? Normally non-US persons who would fall within the four corners of a general license if they were in the United States face no risk of targeting under OFAC sanctions. This practice, which OFAC often states in its FAQs, is based on the concept that if it is legal for a US person to perform a transaction, the US government does not want to sanction non-US persons for engaging in the same behavior. It is unclear, however, whether this same safe harbor exists for General License 46. And since any contracts that involve the government of Venezuela, PdVSA, or PdVSA entities are required to be governed by US law and any payments to a blocked person must be made into the Foreign Government Deposit Funds (created in Executive Order 14373) or another account as instructed by the US Department of the Treasury, it makes sense for foreign persons to confirm the availability of the safe harbor before proceeding. This too may make sense for an OFAC clarifying FAQ.

License Conditions

Moreover, even established US entities must fulfill a number of conditions to rely on General License 46 to authorize transactions that would otherwise be prohibited under the Venezuelan Sanctions Regulations, including in particular reporting requirements to the US Department of State and US Department of Energy that apply to those that export, re-export, sell, resell, or supply Venezuelan-origin oil to countries other than the United States. The following checklist can be used to confirm you are meeting all of the requirements to rely on General License 46. Do not forget that the last one is a continuing obligation to file reports each 90 days that the transactions covered by the general license are ongoing! 

General License 46 Checklist

◻Any sanctioned persons or entities involved in the transaction are only sanctioned under the Venezuelan Sanctions Regulations; such persons and entities are NOT sanctioned under other OFAC sanctions regimes. 
◻The transaction is ordinarily incident and necessary to the lifting, refining, exportation, re-exportation, sale, resale, supply, storage, marketing, purchase, delivery, or transportation of Venezuelan-origin oil. 
◻The transaction is being conducted by an established US entity (an entity organized under the laws of the United States or any jurisdiction within the United States on or before January 29, 2025).
◻The contracts for transactions with the government of Venezuela, PdVSA, or any entity in which PdVSA owns, directly or indirectly, a 50% or greater interest (PdVSA entities) specifies that the laws of the United States or any jurisdiction within the United States govern the contract and that any dispute resolution under the contract occur in the United States. 
◻Monetary payments to a blocked person (that is, persons blocked under only the Venezuela Sanctions Regulations) are made into the Foreign Government Deposit Funds (Executive Order 14373), or another account as instructed by the US Department of the Treasury. 
◻Payment terms are commercially reasonable. 
◻Payment terms do NOT involve debt swaps or payments in gold. 
◻Payment terms and payments are NOT denominated in digital currency, digital coin, or digital tokens issued by, for, or on behalf of the government of Venezuela (including the petro).
◻The transaction does NOT involve a person located in or organized under the laws of Russia, Iran, North Korea, or Cuba, or any entity that is owned or controlled, directly or indirectly, by, or in a joint venture with, such persons. 
◻The transaction does NOT involve an entity located in or organized under the laws of Venezuela or the United States that is owned or controlled, directly or indirectly, by, or in a joint venture with, a person located in or organized under the laws of China. 
◻The transaction does NOT involve the unblocking of any property blocked under the Venezuelan Sanctions Regulations. 
◻The transaction does NOT involve a blocked vessel. Unless OFAC clarifies otherwise, this includes any vessel identified as blocked property on the Specially Designated Nationals and Blocked Persons List as well as any other vessel owned, controlled, managed, or chartered by the government of Venezuela, PdVSA, any PdVSA entity, or any other persons whose property and interests in property are blocked.
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If the oil is exported, reexported, sold, resold, or supplied to a country other than the United States, a detailed report is sent to Sanctions_inbox@state.gov and VZReporting@doe.gov within 10 days of the execution of the first such transaction that identifies the following for each transaction:

  • The parties involved.
  • The quantities, values, and countries of ultimate destination.
  • The dates that the transactions occurred.
  • Any taxes, fees, or other payments provided to the government of Venezuela.
◻CONTINUING: If the oil is exported, reexported, sold, resold, or supplied to a country other than the United States, a detailed report containing the information described immediately above is sent to Sanctions_inbox@state.gov and VZReporting@doe.gov each 90 days that such transactions are ongoing. 

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