Sanctions foreseen by OFAC (Office of Foreign Assets Control) against the Government of Venezuela
Considering the recent events occurred in Venezuela, the Department of the Treasury’s Office of Foreign Assets Control has issued a number of Executive Orders that include sanction programs in order to address the political and humanitarian crisis in Venezuela. Some transactions are permitted under request of a previous authorization.
In particular, E.O. 13835 of May 21, 2018, aims at Prohibiting certain additional Transactions with respect to Venezuela.
Section 1 prohibits any transaction, as well as the provision of financing and other dealings by a United States person (being it an individual or an entity). In particular, the purchase of any debt of the Government of Venezuela as well as the payment of any debt owed to the Government of Venezuela and related credits. In addition, the sale, transfer, assignment or pledging by the Government of Venezuela of any equity interest of which the Government of Venezuela has a half or more of ownership interests is prohibited.
The prohibition of these transactions linked to the financing of the Government of Venezuela aims at cutting down any form of financing to the Government, in order to prevent any activity of the Maduro regime, who among other violations, has won the presidency of the Government by holding snap and unclear elections and thus has undermined the democratic institutions of Venezuela.
These restrictions apply except to the extent provided by statutes or permits granted before the enactment of this order.
Section 2 of the present Order condemns any transaction that evades, avoids or violates any of the prohibitions established in the previous section as well as any attempt aiming at conspiring against the prohibitions set forth.
This further point aims at punishing any form of collaboration with the Government of Venezuela, by further prohibiting any form of illicit action.
Section 3 enounces the definitions necessary to categorize the persons and entities addressed by the Executive Order hereby.
With the aim of condemning recent actions taken by Maduro regime aimed at circumventing U.S sanctions by issuing a digital currency through an unlawful process. The OFAC, through E.O. 13827 of March 19, 2018 prohibits any form of transactions by a United States person or within the United states carried out through digital currency, digital coin or token issued by or on behalf of the Government of Venezuela. These prohibitions are regulated by statutes and regulations. Any further transaction that tries to evades or avoids the aforementioned prohibition is condemned.
After the stringent sanctions that the US Government issued against the Government of Venezuela, which have brought the economic crisis to a head, causing an inflation increase up to 1000 %, the Government of Venezuela has tried to circumvent these sanctions through the use of Bitcoin created by the tax impose on flights. The design of this process of conversion into Bitcoin used by Maduro represents a unique method by which Maduro can avoid sanctions and finance his regime.
In order to stop the issuing of Bitcoin, the OFAC enacted the aforementioned order which prohibits any transaction in form of digital currency.
The E.O 13808 of August 24, 2017 issued in the light of recent actions and policies of the Government of Venezuela including abuses of human rights and fundamental freedoms, humanitarian crisis, illegitimate judicial actions, public corruption and repression against the political opposition, orders the prohibition of all transactions related to new debt with a maturity of greater than 90 days of Petroleos de Venezuela, S.A. (PdVSA); and all other debts with a maturity of 30 years; as likely bonds issued by the Government of Venezuela. The order also prohibits the payment of any rate or distribution of profits to the Government of Venezuela, and the purchase of securities from the Government of Venezuela.
However, General License 1 to the E.O. 13808 of August 24, 2017 authorizes certain activities necessary to wind down existing contracts, thus all transactions prohibited by subsection 1(a)(i)-(iii) and Subsection 1(b) of E.O. 13808 that are necessary to wind down contracts are authorized.
Persons who participate in transactions authorized by the aforementioned General License 1 are required within 10 days after the transaction takes place to file a detailed report with all the necessary information and address it to the Office of Foreign Asset control.
As it is possible to see, although some exceptions are accepted as provided by General License 1, there is nevertheless a strict control on those exceptiond.
General License 4 to the E.O. 13808 of August 24, 2017 authorizes new debt transactions related to the exportation of Agricultural commodities, medicine, medical devices or replacement parts and components to Venezuela or to third parties with the intention to resell the items to Venezuela.
As a matter of fact, to prohibit any kind of transactions, affects from an economic point of view not only the government of Venezuela but the whole population too. Taking into account the ongoing humanitarian crisis that the country is living, to grant transaction of food and medicines is the minimum. The attacks through economic sanctions agaisnst the Maduro regime must not have as a consequence the suffering of civilian population.
General License 3 to the E.O. 13808 of August 24, 2017 authorizes transactions related to the provision and dealings in bonds specified in the Annex that would be otherwise prohibited by the E.O. The General license hereby is not retroactive, thus it authorizes the transactions related to the provision of financing or other dealings in bonds that were issued prior to the effective date of E.O. of August 24, 2017.
 According to local reports, Maduro’s regime evades sanctions with cryptocurrency alongside an airline application called Jetman Pay. Allegedly, Jetman Pay collects airline taxes from travelers who purchase tickets from Maiquetía International Airport and the Venezuelan government agency Sunacrip converts the tax money into BTC and sends the funds to regime accounts in Russia, China, and Bulgaria. (see https://news.bitcoin.com/venezuelan-government-accused-of-using-bitcoin-to-bypass-us-sanctions/)