Earlier this week, the U.S. government partially re-implemented certain recently relaxed sanctions against Venezuela. According to a statement released by the United States Department of State on January 30th, the absence of meaningful progress in allowing candidates of the opposition Unitary Platform to stand for office in the upcoming Venezuelan presidential election has led to the re-imposition of economic measures designed to deprive the Maduro government of funding.
The Biden Administration has set an April deadline for the Maduro regime to uphold his commitments under the Barbados Agreement, signed in October of 2023. If no progress is made between Maduro's United Socialist Party of Venezuela (PSUV) and the opposition Unitary Platform by April 18, the remainder of the recently relaxations are likely to expire, leading to the re-imposition of energy related sanctions.
Actions Taken
In October, in exchange for commitments made by the Maduro Government related to permitting opposition politicians to participate in upcoming elections, the United States issued a series of general licenses that had the effect of relaxing certain aspects of the U.S. Venezuela program. At the time, the United States issued guidance that those relaxations could be rescinded "should the representatives of Maduro fail to follow through on their commitments...."
The U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC") has begin to act on that warning in response to a decision last week by the Venezuelan Supreme Court to bar a leading opposition candidate from the Venezuelan Presidential election. In response, on January 29, 2024, OFAC first issued General License 43A, which had the functional effect of repealing the previous open-ended authorization to conduct activities involving CVG Compania General de Mineria de Venezuela CA ("Minerven") that was provided for in General License 43, and instead requiring that those activities be wound-down by 12:01 AM on February 13, 2024.
The next day, on January 30, 2024, the State Department went further, issuing a statement that unless there were to be progress toward allowing "all presidential candidates to compete in this year's election," a pointed reference to the previous week's Venezuelan court ruling, the United States would re-impose oil and gas related sanctions. Specifically, in October, OFAC had issued General License 44 ("GL 44"), which authorized all activity prohibited by the Venezuelan Sanctions Regulations (including involving Venezuelan state-owned oil and gas company Petróleos de Venezuela, S.A. (PdVSA)) that was "related to oil or gas sector operations in Venezuela." GL 44 was originally only issued to authorize activity until 12:01 AM EDT on April 18, 2024 and OFAC had noted at the time that it would be renewed only if President Maduro continued to implement his commitments under the Barbados Agreement. The State Department's press release indicates that it does not currently view President Maduro as meeting those commitments and OFAC will, therefore, not be renewing GL 44 absent a change in behavior.
Implications
The Venezuelan program remains quite volatile. While the October relaxations represented the first material relaxations that the Biden Administration had implemented, they were explicitly tied to political progress in Venezuela. As that progress appears is jeopardized in Venezuela, so too are the relaxations.
In practice, therefore, activity with Minerven has already become prohibited (again) and existing activity must be wound down in 14 days. The re-imposition of oil and gas related sanctions would be commercially more material, given the importance of the sector to global trade, and OFAC has now given the market a 2.5 month advance warning that it anticipates re-imposing those sanctions absent changes in Venezuela. The United States has effectively put its hand on the table and we will now actively monitor and wait to see what news comes from Venezuela.
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