On August 25, 2017, US President Donald Trump issued an executive order (EO) limiting the government of Venezuela’s ability to access certain types of international financing. The new measures build on existing sanctions designations of senior Venezuelan officials and resemble the types of sectoral sanctions that the United States has imposed on Russia in recent years.

The new sanctions are effective immediately. However, the US Treasury Department’s Office of Foreign Assets Control (OFAC) issued four general licenses alongside the EO that provide, among other things, (i) a 30-day wind-down period for certain transactions involving entities owned or controlled by the government of Venezuela, (ii) authorization to transact in a “grandfathered” set of existing bonds, and (iii) relief for trade in agricultural commodities, medicine and medical devices.

Accordingly, now is the time to identify and inventory any financial exposure to the government of Venezuela, including its commercial entities (e.g., Petroleos de Venezuela, S.A. (PdVSA) and CITGO Holding, Inc.), and to consider how best to mitigate sanctions risk going forward.

The expanded Venezuela sanctions operate by limiting the ability of US persons to engage in certain types of transactions related to providing financing (debt or equity) to or for the benefit of the government of Venezuela, its property and its interests in property. This includes entities owned 50 percent or more, in the aggregate, by the government of Venezuela. As a consequence, both PdVSA and CITGO Holding, Inc. are now subject to sanctions, although both of these entities, in particular, are subject to less onerous restrictions than the rest of the Venezuelan government.

The new measures prohibit US persons from engaging in the following, without a license:

• Transactions related to, providing financing for or otherwise dealing in “new debt” with a maturity greater than 30 days by, on behalf of or for the benefit of the government of Venezuela (except for PdVSA).

• Transactions related to, providing financing for or otherwise dealing in “new debt” with a maturity greater than 90 days by, on behalf of or for the benefit of PdVSA.

• Transactions related to, providing financing for or otherwise dealing in “new equity” issued by, on behalf of or for the benefit of the government of Venezuela, including PdVSA.

• Transactions involving bonds issued by the government of Venezuela prior to August 25, 2017.

• Transactions involving dividend payments or other distributions of profits to the government of Venezuela by any entity owned or controlled, directly or indirectly, by the government of Venezuela (e.g., PdVSA).

• Purchasing any securities from the government of Venezuela, other than “new debt” with a maturity of less than or equal to 30 days (or, in the case of PdVSA, 90 days).

As noted above, OFAC issued four general licenses to accompany the EO. OFAC also provided interpretive guidance in the form of a set of FAQs.

General License 1 provides a 30-day wind-down period (i.e., through September 24, 2017) for US persons to conduct all transactions “ordinarily incident and necessary to winding down” agreements involving new debt with a tenor of greater than 30 days for the government of Venezuela or 90 days for PdVSA; bonds issued by the government of Venezuela prior to August 25, 2017; and the purchase of securities from the government of Venezuela with a tenor of greater than 30 days (or 90 days for PdVSA).

General License 2 authorizes US persons to engage in transactions for new debt, or securities, of any duration, so long as the only government of Venezuela entity involved is CITGO Holding, Inc. or its subsidiaries.

General License 3 authorizes US persons to engage in transactions related to OFAC’s newly published List of Authorized Venezuela-Related Bonds, as well as all transactions involving bonds issued prior to August 25, 2017, if the bonds were issued by US Person entities owned or controlled, directly or indirectly, by the government of Venezuela (e.g., CITGO Holding, Inc.). However, General License 3 does not permit US Persons to purchase bonds on the “List of Authorized Venezuela-Related Bonds” from the government of Venezuela (directly or indirectly).

General License 4 authorizes all transactions related to financing the export or reexport to Venezuela of certain agricultural commodities, medicines and medical devices, including to persons in third countries who are purchasing these items specifically for resale to Venezuela—provided the export or reexport is authorized by the US Commerce Department.

The August 25, 2017 EO significantly expanded US sanctions on Venezuela, and appears to incorporate some of the same types of restrictions that the US has implemented under Russian sectoral sanctions.

While the Venezuelan sanctions, like the Russian sanctions, do not include a commercial embargo, these finance-related restrictions are nonetheless likely to have a broad impact. Also of note, the FAQs highlight the licensing posture of the US government with respect to additional transactions with the government of Venezuela. Specifically, they highlight the policy behind the sanctions by expressly stating that any new debt or equity issuance by the Venezuelan government that has the support of the “democratically elected Venezuelan National Assembly” would likely receive an OFAC license.

The Venezuela sanctions reflect an evolving US approach to sanctions that utilizes targeted financial restrictions rather than purely “blocking and freezing” measures. As with other recent sanctions programs, the Venezuela sanctions also target specific sectors of the target state’s economy, imposing enhanced compliance obligations on financial and energy sector participants that are more substantial than other sectors.

The authors are attorneys at the global law firm Dentons. Peter Feldman is a partner in the firm’s London office. Partners Jason Silverman and Michael Zolandz and associate Nimrah Najeeb are based in the firm’s Washington, DC office.