Caracas Chronicles

On Wednesday, the Office of Foreign Assets Control (OFAC) under the U.S. Treasury Department published General License 44A (GL44A). The new license replaced General License 44 (GL44), which originally came into force on October 18th, 2023. 

GL44 was granted as a response to the Barbados Agreements, and broadly allowed transactions with Venezuelan State entities and companies in the oil & gas sector which would ordinarily not be authorized under the Venezuela Sanctions Regime (VSR), a broad collection of Executive Orders and other legislative instruments which have codified U.S. sanctions on Venezuela. 

This license was conditional and part of a stick-and-carrot approach under which the U.S. would either renew or revoke it after six months, depending on the Venezuelan government’s fulfillment of certain electoral guarantees and political rights agreed upon in exchange for the sanctions relief. Thus, GL44’s non-renewal and the issuance of GL44A is a response to what the U.S. perceives as Venezuela not fully complying with the Barbados Agreements so far.

There seems to be some confusion about the extent of the “snapback” of sanctions under the new license. GL44A basically authorizes activities related to the winding down of transactions previously covered by GL44 until May 31, 2024. 

This means, for instance, that investors who may have entered into new agreements with PDVSA or the Venezuelan oil ministry to increase oil production have a 45-day window to wind down their arrangements, but it also allows for investors to comply with the financial commitments they may have undertaken in their contracts with PDVSA or the Venezuelan oil ministry which they must now wind down. This is an underappreciated aspect of the new license: had OFAC chosen not to provide a wind down period, or a shorter one, investors could have held off on payments after GL44’s expiration based on a lack of license coverage. This month and a half allows them to wind down on relatively good terms with the Venezuelans, which could be helpful down the road.

Crucially, the OFAC has left the door open for persons seeking to engage in transactions previously covered by GL44 to apply for specific licenses. This might allow international companies that have recently acquired shares in Venezuelan joint ventures or increased their investment and responsibilities within them under GL44 to continue their activities with bespoke license coverage.

Furthermore, two other licenses remain in place: GL41, which covers Chevron’s expanded operations aiding its debt recovery, and GL8M, which covers limited maintenance of essential activities and wind down of operations of the four big service companies: Halliburton, Schlumberger, Baker Hughes and Weatherford.

So, to sum it up, not all sanctions were reinstated, and given the timing of GL44A, there may be some leeway for political negotiations to continue, as well as for interested parties to apply for specific licenses to enter into or continue transactions covered by GL44 up until today.