United States: United States Imposes Sanctions On Venezuela's President And 13 Current And Former Government Officials

On July 31, 2017, the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC) announced the addition of Venezuelan President Nicolas Maduro to its list of Specially Designated Nationals and Blocked Persons (the "SDN List"). The action follows the addition of 13 current and former government officials to the SDN List on July 26, 2017 (collectively, the "July designations"). Pursuant to these sanctions, U.S. persons cannot engage in transactions with President Maduro or the other listed parties, and all of their assets subject to U.S. jurisdiction are frozen.

In light of this recent action, this client alert discusses (i) the political background in Venezuela, including OFAC's decision to designate President Maduro and key government officials; (ii) the operation of U.S. sanctions on Venezuela; and (iii) the possibility of future sanctions targeting Venezuela.

Political Background of U.S. Sanctions on Venezuela

President Obama issued Executive Order 13692, Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Venezuela, on March 9, 2015 in response to the government of Venezuela's erosion of human rights guarantees, persecution of political opponents, curtailment of press freedoms, use of violence in response to protests and the presence of significant public corruption. OFAC most recently announced the July designations pursuant to this Executive Order.1

At the time of the July designations, OFAC indicated that it was acting in response to the recent decision by the Venezuelan government to proceed with elections for a National Constituent Assembly (ANC)—an assembly that will be tasked with rewriting Venezuela's constitution.2 According to OFAC, the individuals targeted for sanctions worked for agencies associated with the elections, or played a role in government corruption or violence against opposition protestors. In a statement to the press, Treasury Secretary StevenMnuchin stated that the sanctions "highlight the high costs and personal repercussions that enablers of the [Maduro] regime could face" for undermining Venezuelan democracy through theANC.3

President Maduro originally announced the decision to convene theANC on May 1, 2017, and justified the move as a necessary measure to overcome conflict and restore peace in Venezuela.4 Opponents of President Maduro, who claim that his administration is responsible for the civil unrest and severe economic crisis afflicting the country, characterize theANC as a maneuver that will undermine Venezuela's democracy by consolidating power in the hands of the Maduro administration under a new constitution.5 The Trump administration also issued a statement denouncing President Maduro and signaling the possibility of "swift economic actions" should theANC process move forward.6 The July designations therefore may be only one step among multiple actions taken by the U.S. government should the ANC process continue, as discussed further below.

Operation of U.S. Sanctions on Venezuela

Executive Order 13692 is codified in the Venezuela Sanctions Regulations (VSR), 31 C.F.R. Part 591. It is a list-based program in which the U.S. government identifies specific individuals or entities that it deems to be engaging in the activities described in the Executive Order and includes them on the agency's SDN List. Once a person is designated on the SDN List, U.S. persons (which include U.S. citizens, legal permanent residents, entities organized under the laws of the United States or a U.S. jurisdiction (including foreign branch offices), and anyone located in the United States) must block that person's property and interests in property, unless an exception applies or the activities are otherwise authorized by OFAC. Entities that are owned, directly or indirectly, 50 percent or more by persons on the SDN List must also be blocked by U.S. persons.

Restrictions Related to Designations. As a result of these designations, U.S. persons may not:

  • engage in transactions involving SDNs
  • engage in transactions with entities that are 50 percent or more owned by an SDN, directly or indirectly
  • engage in transactions involving third parties that are acting on behalf of SDNs or that are otherwise designed to evade or avoid the sanctions restrictions.

Limitations on Effect of Designations. As with other similarly constructed list-based sanctions programs, these designations do not prevent U.S. persons from engaging with entities that designated persons work for or control without an ownership interest, except to the extent that a U.S. person is engaging with a designated individual, such as in cases where the SDN signs a contract on behalf of an employer. Furthermore, the designations do not extend to family members of designated individuals, unless they act on the designated individual's behalf.

Important also, the VSR do not, at this time, ban imports from Venezuela; prevent U.S. persons from entering into contracts involving Venezuelan businesses; or otherwise restrict U.S.-person engagement in projects with Venezuelan industries, such as the energy sector, separately from the constraints placed on the designated parties' property and interests in property as described above.

Potential for Future Sanctions on Venezuela

The sanctions imposed on President Maduro in particular signal that the Trump administration is willing to act in response to actions of the Venezuelan leadership that it views as undermining democratic institutions through the ANC process. OFAC only rarely designates heads of state under its sanctions programs, which underlines this point. Thus, the July designations suggest the possibility that the Trump administration, or members of Congress, could consider and impose broader economic sanctions on Venezuela if President Maduro continues with the ANC process.

Administration officials have indicated that they have not foreclosed the possibility of issuing new sanctions targeting Venezuela's oil sector.7 For practical reasons, at this stage, it appears unlikely that such sanctions would encompass a total ban on oil shipments from Venezuela to the United States due to the drastic domestic and international repercussions that would have, particularly because Venezuela remains one of the largest suppliers of oil to the United States. However, the administration has signaled that escalating sanctions might include restrictions on sales of U.S. light crude to Venezuela (which Venezuela uses to process its heavy crude prior to export) and banking restrictions, including on Venezuela's state-owned oil company PDVSA.8 However, even measured action could result in significant disruptions to international oil markets, as well as negative impacts on the general economy and population of Venezuela.

The U.S. Congress has been deeply engaged in promulgating other sanctions programs (most recently, Russia, North Korea and Iran (see our alert here)), with broad bipartisan support. Since Maduro's antidemocratic actions leave the Venezuelan regime without allies in Congress, members might take the opportunity to demand additional sanctions on Venezuela. There is bipartisan support in Congress for legislating actions against Venezuela, as evidenced by the introduction in the Senate of the Venezuela Humanitarian Assistance and Defense of Democratic Governance Act of 2017, which directs the President to impose sanctions on any current or former official of the Venezuelan government who is determined to have perpetrated significant acts of public corruption, or actions or policies that undermine democratic processes or institutions.

Nevertheless, it remains to be seen whether the imposition of economic sanctions will be effective or if they may instead embolden President Maduro's regime. Indeed, following his addition to the SDN List, Maduro reportedly described the action as a reflection of the United States' "desperation" and "hatred" for Venezuela's socialist government and told his supporters that he does not "take orders from the empire."9 There are some indications that U.S. allies, such as Colombia, Panama, Mexico and Canada, are considering similarly targeted sanctions in coordination with the U.S. actions last week.10 If taken, those actions may undercut President Maduro's argument that the recent measures form part of the United States' imperialist agenda. Broader coordination, particularly from major Latin American countries like Brazil, and countries in the European Union, could help make the sanctions more effective and may shape any further action on the part of the United States.

Footnotes

1 OFAC also recently designated eight members of the Venezuelan Supreme Court of Justice for their role in undermining the democratic process. OFAC Press Center, Treasury Sanctions Eight Members of Venezuela's Supreme Court of Justice (May 18, 2017), https://www.treasury.gov/press-center/press-releases/Pages/sm0090.aspx.

2  OFAC Press Center, Treasury Sanctions the President of Venezuela (July 31, 2017), https://www.treasury.gov/press-center/press-releases/Pages/sm0137.aspx.

3 OFAC Press Center, Remarks by Treasury Secretary Steven T. Mnuchin on Sanctions (July 31, 2017), https://www.treasury.gov/press-center/press-releases/Pages/sm0140.aspx.

4 Cawthorne & Ulmer, After Month of Protests, Venezuela's Maduro Triggers Shakeup of Powers, Reuters (May 1, 2017), http://www.reuters.com/article/us-venezuela-politics-idUSKBN17X203.

5 Id.

6 The White House, Office of the Press Secretary, Statement from President Donald J. Trump (July 17, 2017), https://www.whitehouse.gov/the-press-office/2017/07/17/statement-president-donald-j-trump.

7 The White House, Office of the Press Secretary, Press Briefing by Press Secretary Sarah Sanders, Treasury Secretary Steven Mnuchin, and National Security Advisor H.R. McMaster, 7/31/2016 #3 (July 31, 2017), https://www.whitehouse.gov/the-press-office/2017/07/31/press-briefing-press-secretary-sarah-sanders-treasury-secretary-steven.

8 Parraga, U.S. Oil Sale Ban to Venezuela's PDVSA Would Hit Refining, Blending, Reuters (July 31, 2017), http://www.reuters.com/article/us-venezuela-politics-exports-idUSKBN1AG07G?il=0.

9 Savransky, Venezuela's Maduro Says U.S. Sanctions Show Trump's "Desperation" and "Hate," The Hill (August 1, 2017), http://thehill.com/homenews/administration/344725-venezuelas-maduro-says-us-sanctions-against-him-show-trumps.

10 See Colombia Se Une a Las Sanciones de EEUU a Venezuela, Hispantv (July 28, 2017), http://www.hispantv.com/noticias/colombia/348791/apoyo-sanciones-eeuu-funcionarios-venezuela-cardenas; México Se suma a Sanciones de Estados Unidos Contra Funcionarios Venezolanos, Runrunes (July 27, 2017), http://runrun.es/internacional/319292/mexico-se-suma-a-sanciones-de-estados-unidos-contra-funcionarios-venezolanos.html; Panamá Apoya Sanciones de EEUU Contra Venezuela, TVN Noticias (July 29, 2017), https://www.tvn-2.com/nacionales/Gobierno-Panama-sanciones-EEUU-Venezuela_0_4813768604.html; Zilio, Canada Reviewing U.S. Sanctions on 13 Venezuelan Government Officials, The Globe and Mail (July 27, 2017), https://www.theglobeandmail.com/news/politics/canada-reviewing-us-sanctions-on-13-venezuelan-government-officials/article35814501/.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions