On August 24, 2017, President Donald Trump issued an executive order effective August 25, 2017, imposing broad new sanctions to impair the Venezuelan government’s ability to raise funds. The move comes after the establishment of the National Constituent Assembly in Venezuela and the consolidation of power by President Nicolás Maduro. The executive order establishes new sectoral sanctions targeting the Venezuelan oil and gas industry and the Venezuelan government, with certain limited exceptions for CITGO Holding, Inc., the Venezuelan-owned company with significant operations in the United States.

The new sanctions prohibit certain activities of US citizens, US permanent residents, entities organized under US law (and their foreign branches), and individuals and entities located in the United States, regardless of nationality (collectively, “US Persons”). Specifically, the executive order prohibits all transactions by a US Person or within the United States related to, providing financing for, or otherwise dealing in the following:

  • New debt with a maturity greater than 90 days issued by or for the benefit of state-owned Petroleos de Venezuela S.A. (“PDVSA”);
  • New debt with a maturity greater than 30 days, or new equity, issued by or for the benefit of the Government of Venezuela other than the prohibited PDVSA debt;
  • Bonds issued by the Government of Venezuela (including PDVSA) prior to August 25, 2017;
  • Dividend payments or other distributions of profits to the Government of Venezuela for any entities owned or controlled by the Government of Venezuela; or
  • Securities purchases from the Government of Venezuela, including PDVSA (other than new debt with maturities shorter than the thresholds stated above).

General Licenses

There are several important general licenses that provide exceptions to the executive order.

  • General License 1 sets in place a wind-down period for contracts and agreements in effect prior to the issuance of the executive order. It authorizes all transactions through September 24, 2017, if those transactions are ordinarily incident to the winding down of contracts or other agreements that were already in existence and not otherwise prohibited by the order.
  • General License 2 provides a carve-out from the executive order’s prohibitions for certain transactions related to CITGO Holding, Inc. and its subsidiaries. Though the CITGO entities are owned by the Government of Venezuela, securities purchases from and new debt transactions with these entities are permitted so long as no other Venezuelan government entities are involved.
  • General License 3 provides for exceptions to the prohibitions for dealings in certain Venezuelan government bonds. This list includes a series of bonds issued by PDVSA and other Government of Venezuela entities. This general license also authorizes transactions and dealings in bonds issued prior to August 25, 2017, if the bonds were issued by US Persons owned or controlled by the Venezuelan government, including bonds issued by CITGO Holding, Inc. and its subsidiaries.
  • Finally, General License 4 provides for transactions, financing, and other dealings for the exportation or re-exportation of agricultural commodities, medicine, or medical devices from the United States or by US Persons to Venezuela, assuming such an exportation or re-exportation is otherwise authorized by the Department of Commerce.


The Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued a set of FAQs in conjunction with the new sanctions. The FAQs clarify several aspects of the sanctions:

  • The new sanctions are not blocking sanctions: US Persons do not need to block transactions that would be prohibited under last week’s sanctions measures, assuming no other sanctioned party is involved. Rather, US Persons are required to reject the transactions and report the rejection to OFAC within 10 business days. (Note, however, that there are blocking sanctions previously imposed on Venezuelan Specially Designated Nationals (“SDNs”), so US Persons still need to screen the parties to and beneficiaries of transactions involving Venezuela in order to avoid dealing with SDNs.)
  • The sanctions apply to any entity owned 50 percent or more by the Government of Venezuela.
  • The sanctions relating to new Venezuelan government debt cover any extensions of credit to the Government of Venezuela of over 30 days (or over 90 days for PDVSA). Accordingly, any US Person with a contract to supply goods or services to the Government of Venezuela must ensure that the government is contractually obligated to pay for those goods or services within 30 days (or 90 days for PDVSA). Guarantees of prohibited new debt are also prohibited.
  • US Persons are prohibited from providing “services in support” of prohibited new debt.
  • Although General License 3 excepts certain bonds from the prohibitions against dealing in PDVSA or other government bonds, including providing financing for or services in connection with such bonds, US Persons are not permitted to purchase any of the excepted bonds, directly or indirectly, from the government.
  • US financial institutions are still authorized to maintain correspondent accounts and process dollar-clearing transactions for the Government of Venezuela, so long as those activities do not involve the transactions prohibited by the executive order.
  • With respect to already existing revolving credit facilities, US Persons are permitted to engage in drawdowns and disbursements with terms longer than the threshold maturities so long as terms were contractually agreed prior to the executive order and are not modified afterwards.
  • US Persons are permitted to deal in letters of credit that the Government of Venezuela is issuing, advising, or confirming, but not in letters of credit for which the Government of Venezuela is the borrower or otherwise the recipient of an extension of credit.
  • US Persons may extend credit in excess of the threshold maturities to non-sanctioned parties for the purpose of enabling such parties to purchase goods or services from the Venezuelan government so long as the government is not indirectly a borrower.
  • There is no exception at this time for derivatives transactions relating to Venezuelan government debt.

Practical Considerations

The new financial sanctions represent a significant escalation in US sanctions against Venezuela. All persons engaged in business or financial transactions relating to Venezuela should promptly ascertain whether those transactions are permitted under the new sanctions. If not, such persons should consider winding down the transactions while that process is permitted under General License 1 or seeking a specific license from OFAC to permit continuation of the transactions. Non-US Persons should take particular care when transacting in US dollars, which is likely to entail participation by US banks. All persons affected by the new sanctions should also keep alert for future general licenses and FAQs.