Venezuela: United States sanctions for shipping activities

Ricardo Maldonado
Pittier, Almandoz y Eliaz, Caracas
​​​​​​​rmp@pae-legal.com

The following article^[1] provides a view, from a Venezuelan legal perspective, of United States' sanctions issued against the Venezuelan Government and public officials, especially those affecting vessel operations in Venezuela and the exportation of products from Venezuela to third countries, such as oil, its derivatives, minerals and gold.

Oil, gas and hydrocarbon production and exportation represent the main source of income in Venezuela, as the country has the biggest petroleum reservoir of the world.^[2] As a result, the major export goods in the country are oil and its derivatives, natural gas, iron ore and other minerals, which are exported through maritime transportation carried out by oil and chemical tanker vessels, as well as bulk carriers and general cargo ships. It is important to note that, in Venezuela, oil, natural gas and minerals are entirely owned by the state, mainly through the state-owned oil company Petróleos de Venezuela, SA (PDVSA).

For many years, the goods have been shipped on board international flagged vessels operated by stakeholders from the US, Europe and Asia. These stakeholders are subject to their own legislation and international conventions in terms of safety, security and pollution prevention. Furthermore, as international oil trade touches several (or all) jurisdictions, money and payments coming from oil trading go through several jurisdictions, and the payment currency is normally reflected in US dollars or by using the US bank system. In order to avoid money laundering, terrorism financing and other international illegal activities, the US Treasury and the US Government are entitled to apply certain restrictions, control and regulations to international trade operations.

During the last few years, due to political tension between Venezuela and the US, Venezuela has been subject to Office of Foreign Assets Control (OFAC) sanctions. As background, on 1 November 2018, the Administration of the President of the US issued Executive Order No 13,850, through which a series of sanctions were decreed against subjects directly or indirectly linked with the Venezuelan Government and allegedly immersed in acts such as corruption and embezzlement of the country's assets. In general, the sanctions consisted of the blocking of assets and interests located within the jurisdiction of the US and owned by natural or legal persons related to the government of Nicolás Maduro, the current President of Venezuela.

The OFAC included PDVSA in the list of subjects sanctioned according to Section 1 of Executive Order 13850 issued on 1 November 2018. As a result, all property and interest in the property of PDVSA, subject to the jurisdiction of the US, will be subject to the restrictions therein provided. The said measures include the blocking of assets, and the prohibition of individuals and legal entities domiciled in the US from carrying out transactions with any person linked to PDVSA. This clearly affects and impacts the Venezuelan economy, international trading and oil trading. Thus, shipowners, operators, marine insurers, reinsurers, P&I Clubs and compliance departments from international banks are reluctant and extremely cautious to cover or intervene in an oil or mineral operation departing from Venezuela. Furthermore, shipping carrying gold and other minerals can be sanctioned as well.^[3]

Maritime activities in Venezuela are not sanctioned per se. General cargo can be discharged in Venezuela, and port or custom rights and payments are permitted, as provided in the General License 30A.^[4]

As to oil shipping, on 5 April 2019, the OFAC issued new commercial sanctions for oil-related entities and vessels. This time, the sanctions' subjects included approximately 30 vessels used to transport crude oil in and out of Venezuela, along with two foreign companies linked to PDVSA's commercial activities.^[5] The sanctions were issued against vessels and companies related to irregular acts and oil export from Venezuela to Cuba. Vessels providing other types of services and transporting other goods have not been affected, nor sanctioned. More recently, in January 2021, another six vessels were designated by the OFAC for their ties to a network attempting to evade US sanctions on Venezuela's oil sector.

Initially envisaged as a political sanction against the Venezuelan Government, OFAC sanctions restrict an important volume of Venezuelan exports, P&I Clubs increase premiums or decide not to cover ventures, and internal and external advisers make a careful study of risks and sanctions that may arise when shipping has a Venezuelan label.

To solve the aforementioned issues and sanctions, shipping stakeholders, owners and operators must prove to their underwriters, clients and compliance officers that: (1) trading is not sanctioned by OFAC or other international entity; (2) there is a General or Particular License allowing certain types of shipments or operations; and (3) a legal opinion supports the safety of the export operation.

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