Can You Sell Venezuelan-Origin Oil Now? Try Our Checklist and See!

With the issuance of General License 46 on January 29 and subsequently General License 47 on February 3, under the Venezuelan Sanctions Regulations, OFAC provides authorization for transactions related to certain activities by “established US entities” involving Venezuelan-origin oil and certain activities related to US-origin diluents. 

General License 46

Covered Activities 

The covered transactions under General License 46 are limited to those ordinarily incident and necessary to the activities of lifting, export, reexport, sale, resale, supply, storage, marketing, purchase, delivery, or transportation of Venezuelan-origin oil by established US entities. The general license specifically states that these activities include the refining of Venezuelan-origin oil, arranging shipping and logistics services, chartering vessels, obtaining marine insurance and protection and indemnity coverage, and arranging port and terminal services. Consistent with OFAC’s long-standing interpretation of its “including” clauses, we interpret this list to be illustrative and not exclusive.

Although General License 46 refers to “the lifting” of Venezuelan-origin oil, it is unclear whether the term refers to loading the crude oil from the storage terminal onto a transport vessel or the bringing up of oil from underground. If it refers only to loading, the general license does not appear to cover, for now, the supply of products and services that will be needed to fix and modernize the drilling and production of Venezuelan crude oil as opposed to its refining. We hope OFAC will publish an FAQ clarifying this ambiguity. 

‘Established’ US Entities

The underlying Venezuelan-oil-related activity must be conducted by an established US entity (defined as an entity organized under the laws of the United States or any jurisdiction within the United States on or before January 29, 2025). We suspect this is to avoid having non-US persons form new US entities to take advantage of this license. Where does this leave non-US persons who want to trade in Venezuelan-origin oil? Provided that an established US entity is a party to the underlying Venezuelan-oil-related activity, non-US persons conducting ordinarily incident and necessary activities would be covered. But what about Venezuelan-oil-related activity where no established US entity is involved? Normally, non-US persons who would fall within the four corners of a general license if they were in the United States face no risk of targeting under OFAC sanctions. This practice, which OFAC often states in its FAQs, is based on the concept that if it is legal for a US person to perform a transaction, the US government does not want to sanction non-US persons for engaging in the same behavior. It is unclear, however, whether this same safe harbor exists for General License 46 where no established US entity is involved. And since any contracts that involve the government of Venezuela, PdVSA, or PdVSA entities are required to be governed by US law and any payments to a blocked person must be made into the Foreign Government Deposit Funds (created in Executive Order 14373) or another account as instructed by the US Department of the Treasury, it makes sense for foreign persons to confirm the availability of the safe harbor before proceeding. This too may make sense for an OFAC clarifying FAQ.

License Conditions

There are a number of conditions that must be fulfilled in order to rely on General License 46 to authorize transactions that would otherwise be prohibited under the Venezuelan Sanctions Regulations, including in particular reporting requirements to the US Department of State and US Department of Energy that apply to those that export, re-export, sell, resell, or supply Venezuelan-origin oil to countries other than the United States. The following checklist can be used to confirm you are meeting all of the requirements to rely on General License 46. Do not forget that the last one is a continuing obligation to file reports each 90 days that any transactions involving oil that is exported, reexported, sold, resold, or supplied to a country other than the United States pursuant to the general license are ongoing! 

General License 46 Checklist

General License 47 

Covered Activities 

Covered activities under General License 47 are limited to those that are ordinarily incident and necessary to the exportation, re-exportation, sale, resale, supply, storage, marketing, delivery, or transportation of US-origin diluents to Venezuela. Importantly, there is no requirement under this general license that an “established US entity” be involved. 

The transactions authorized include the processing of payments and arranging shipping and logistics services, including chartering vessels, obtaining marine insurance and protection and indemnity coverage, and arranging port and terminal services. 

General License 47 includes the authorization of such transactions with the government of Venezuela, Petroleos de Venezuela, S.A., or any PdVSA Entities, as well as port authorities or terminal operators that are part of the government of Venezuela. 

License Conditions

The general license includes numerous license conditions. The following checklist can be used to confirm you are meeting all of the requirements under General License 47. Be mindful again of the continuing obligation to file reports every 90 days that the transactions under the general license are ongoing!

General License 47 Checklist