On October 15, 2023, following an accord with the Maduro regime in Venezuela, the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) issued General License 44, “Authorizing Transactions Related to Oil or Gas Sector Operations in Venezuela,” which temporarily authorized transactions related to oil and gas sector operations, including transactions involving PdVSA. This was described in the Reed Smith update, which may be found here. Prior to the issuance of General License 44, U.S. persons were prohibited from engaging in virtually all oil and gas-related transactions in Venezuela, as well as with any Venezuelan state-owned entity or Venezuelan Specially Designated National (“SDN”) such as PdVSA. Furthermore, non-U.S. persons were exposed to secondary sanctions if providing material support to PdVSA or if OFAC found that a non-U.S. entity was “operating in the oil sector of Venezuela”. General License 44, now set to expire on April 18, 2024, temporarily suspended these U.S. sanctions against PdVSA and the Venezuelan oil and gas sector.

As part of the terms of the sanctions relief, the Maduro regime had agreed to allow a fairer vote in the elections scheduled for July of 2024. The Biden Administration has since determined that Maduro has failed to meet the terms of the agreement. As a result, on January 30, 2024, the U.S. State Department announced that it did not intend to renew General License 44 after April 18, and that the U.S. sanctions would be reimposed from that date. This announcement may be found here. On April 17, OFAC issued General License 44A, “Authorizing the Wind Down of Transactions Related to Oil or Gas Sector Operations in Venezuela”, which allows both U.S. and non-U.S. actors to wind down their operations until 12:01 AM EST on May 31, 2024.

General License 44A and its accompanying FAQs authorizes through May 31, activities that are ordinarily incident and necessary to the wind-down of any transaction related to oil or gas sector operations in Venezuela previously authorized by Venezuela General License 44. Per the FAQ issued by OFAC, this includes but is not limited to activities including (1) the production, lifting, sale, and exportation of oil or gas from Venezuela, and provision of related goods and services; (2) the payment of invoices for goods or services related to oil or gas sector operations in Venezuela; and (3) the delivery of oil and gas from Venezuela to creditors of the Government of Venezuela, including creditors of entities in which Petróleos de Venezuela, S.A. (PdVSA) owns, directly or indirectly, a 50 percent or greater interest, for the purpose of debt repayment. This General License is however a wind-down, and entering into new business that was previously authorized under General License 44 will not be considered a wind-down activity and will not be covered by General License 44A. Accordingly, these wind-down activities are only permitted to the extent the underlying transaction was entered into prior to April 18 at 12:01 AM EST.

Notably, OFAC also stated that U.S. and non-U.S. persons may continue to rely on other authorizations related to Venezuela’s oil or gas sector operations in Venezuela, including General License 8M, “Authorizing Transactions Involving Petróleos de Venezuela, S.A. (PdVSA) Necessary for the Limited Maintenance of Essential Operations in Venezuela or the Wind Down of Operations in Venezuela for Certain Entities” and General License 41, “Authorizing Certain Transactions Related to Chevron Corporation’s Joint Ventures in Venezuela.”

Please contact a member of the Reed Smith Team below if you have any questions.