The US has increased significantly the scope of sanctions against the Maduro regime in Venezuela with the August 5th issue by President Trump of Executive Order 13884, Blocking Property of the Government of Venezuela.
The order applies primarily to US citizens, but it also exposes non-US persons to the risk of sanctions if they provide material assistance to the Government of Venezuela “Material assistance” is widely defined in the Order.
Executive Order 13884 blocks the assets of the Government of Venezuela either in the US or in the possession and control of any US person. US citizens effectively are prohibited from engaging in any transactions with the Government of Venezuela, its agencies, or any entity that government owns or controls.
Non-US persons can have their assets in the United States blocked if they are found materially to have assisted or supplied goods or services in support of the Government of Venezuela.
The August 5th EO did not establish a full embargo against Venezuela or its private sector. It does however have a serious impact on the Government of Venezuela and on the ability of US persons to engage in transactions with that government (and the entities it owns and controls).
FAQ 680, issued on August 6th, states that without specific authorization from OFAC US persons are generally prohibited from engaging in transactions with the Government of Venezuela or entities in which the Government of Venezuela owns, directly or indirectly, a 50% or greater interest. The FAQ points out that US persons are prohibited from engaging in transactions with entities 50% or more owned by the Venezuelan Government even if those entities are not specifically named on the US Specially Designated Nationals and Blocked Persons List (SDN List).
FAQ 680 specifically states that US persons are not prohibited from engaging in transactions involving the country or people of Venezuela, provided blocked persons or any conduct prohibited by any other Executive Order imposing sanctions measures related to the situation of Venezuela, are not involved. The EO thus largely spares Venezuela’s private sector.
General License 28 provides for a grace period until September 4th for all transactions and activities which are ordinarily incident and necessary to the wind down of operations, contracts or other agreements involving the Government of Venezuela that were in effect prior to August 5th.
Section 1(b)(i) of the Executive Order 13884 provides for the blocking of property and interest in property of any person (not just a US person) who is determined by the Secretary of Treasury, in consultation with the Secretary of State, to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any person included on the list of Specially Designated Nationals and Blocked Persons maintained by OFC whose property and interest in property are blocked pursuant to this order.
Since the property and interest in property of the Government of Venezuela, its agencies, and any entities in which it holds a 50% or greater interest have been blocked pursuant to the August 5th EO, this provision means that any non-US person who provides material assistance to, or goods or services in support of, the Government of Venezuela, its agencies and any entity in which it holds a 50% or greater interest could itself be sanctioned and have its property in the US blocked. In marine terms, legal firm Freehill Hogan & Mahar observed that the question which immediately arose was whether the provision of ocean transportation could be considered either material assistance or service in support of an entity whose property is blocked under the EO. FHM said that it would certainly seem conceivable that OFAC could make this determination and comments by US National Security Advisor John Bolton suggested that Executive Order 13884 could be construed broadly.
In other words, the obvious question for non-US persons in the maritime community is just how aggressively EO 13884 will be implemented and enforced.
EO 13850, which was issued in November 2018 and under which the Venezuelan state oil company PdVSA was designated to the SDN List in January 2019, also contains a provision providing for the imposition of sanctions against any person who provides material assistance to or goods or services in support of PdVSA or other blocked entity. However, as yet, no non-US persons have been sanctioned on that basis. OFAC has instead relied on other provisions of EO 13850 to impose sanctions on non-US persons. In particular, in 2019, seven non-US shipowners were named to the SDN List for having “operated in the oil sector the Venezuelan economy” by engaging in the petroleum trade between PdVSA and Cuba.
Of course, OFAC might choose to implement the latest EO differently. A statement issued on August 6th by the White House stated that the August 5th Executive Order “…authorizes the Secretary of the Treasury, in consultation with the Secretary of State, to impose sanctions on persons who provide support to Nicholas Maduro and his illegitimate regime.” National Security Advisor John Bolton, speaking at a conference in Peru on August 6th, stated with respect to the EO: “We are sending a signal to third parties that want to do business with the Maduro regime: Proceed with extreme caution. There is no need to risk your business interests with the US for the purposes of profiting from a corrupt and dying regime.”
FHM noted that a similar warning from Mr. Bolton preceded the designation of foreign shipowners to the US SDN List for operating in the PdVSA/Cuba trade. It said that the comments surrounding the issuance of EO 13884 suggested the possibility of a more aggressive implementation of the EO with respect to non-US persons who engage in transactions with the Government of Venezuela.