On February 1, 2019, the Office of Foreign Assets Control (“OFAC”) issued new regulations in connection with the January 28, 2019 designation of Petróleos de Venezuela, S.A. (“PDVSA”) and of any entity in which PDVSA owns, directly or indirectly, a 50 percent or greater interest, such as Alba de Nicaragua S.A. (“ALBANISA”).
First, OFAC issued two new general licenses: General License 9A authorizing U.S. persons to engage in all transactions and activities related to dealings in certain securities; and General License 3B authorizing U.S. persons to engage in all transactions related to, the provision of financing for, and other dealings in the bonds that are listed therein.
Second, OFAC issued new guidelines shedding light on the authorizations for (i) U.S. and non-U.S. persons to continue to constitute, offer, and trade in funds that include only synthetic risk in holdings in PDVSA; (ii) U.S. financial institutions to reject, rather than block, certain funds transfers that involve PDVSA; (iii) U.S. persons to purchase petroleum and petroleum products from PDVSA pursuant to OFAC’s general licenses. OFAC’s new guidelines also shed light on the prohibitions for (i) U.S. funds to participate in transactions related to holdings in PDVSA; (ii) U.S. persons to engage in swaps and non-cash transactions involving the purchase or exchange of petroleum or petroleum products in which PDVSA has an interest; (iii) non-U.S. entities to purchase petroleum and petroleum products from PDVSA, absent OFAC’s authorization, if the transaction involves U.S. persons or any other U.S. nexus.
Finally, OFAC issued new clarifications on (i) the general licenses involving certain bonds, including the PDVSA 2020 8.5 percent bond; (ii) the types of activities that OFAC authorizes for the maintenance or wind down of operations or existing contracts with PDVSA; (iii) the level of due diligence that financial institutions or registered broker-dealers should have in connection with certain transfers or divestment of debt from PDVSA; (iv) the scope of General Licenses 9A and 3B.