On May 12, 2020, the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) announced that Swedish oil refiner Nynas AB (“Nynas”) was no longer subject to sanctions after undergoing an ownership restructuring in which Petroleos de Venezuela (“PdVSA”) sold its majority ownership interest in the company.
Nynas had previously been sanctioned under OFAC’s Venezuela sanctions program for being owned 50% or more by PdVSA, which resulted in Nynas being subject to OFAC’s blocking provisions. With OFAC’s announcement, and the Nynas corporate restructuring, Nynas is no longer blocked and U.S. persons can engage in transactions or activities with the company, provided that those activities do not involve blocked persons or otherwise prohibited transactions. Notably, U.S. persons are still prohibited from engaging in almost all dealings with PdVSA or the Government of Venezuela, or any entity owned 50% or more, directly or indirectly, by either.
OFAC’s May 12, 2020 announcement also included amended General Licenses 3H and 9G, both of which cover dealings in Venezuela-related securities, and technical updates to two Venezuela-related FAQs. Specifically, the amended General Licenses clarify the applicability of the Venezuela Sanctions Regulations (31 C.F.R. Part 591), which now incorporate the executive orders issued under the Venezuela sanctions program. In addition, the amended General License 3H reflects that Nynas is no longer a Blocked Person. Thus, Nynas has been removed from General License 3H, sub-section (e), which authorizes all transactions and activities necessary to dealings in any bonds that were issued prior to August 25, 2017 by PDV Holdings, Inc. and CITGO Holdings, Inc.
Notably, the longstanding requirements of General Licenses 3H and 9G continue to be in effect, including the restrictions on U.S. persons’ ability to purchase new interests in Venezuela-related securities and the requirement that U.S. persons sell any such interests to non-U.S. persons. Furthermore, non-U.S. persons can continue to deal in the securities covered by General Licenses 3H and 9G, however, to the extent such transactions involve U.S. persons or the U.S. financial system, then the transactions must comply with the General Licenses and cannot involve sales of any interests in those securities to U.S. persons, other than as permitted in certain circumstances.
We will continue to closely monitor developments in this space. If you have any questions or concerns about U.S. sanctions, please contact Bruce G. Paulsen (212-574-1533), Andrew S. Jacobson (212-574-1477), or Noah S. Czarny (212-574-1642) at Seward & Kissel’s Sanctions Practice Group.