Washington 'embargoes' Venezuela assets: Update 2

An executive order by President Donald Trump, issued yesterday, blocks the transfer of any property or shares of property in the US held by the Venezuelan president Nicolas Maduro's government or anyone determined by the Treasury and State departments to be supporters of the Venezuelan government. The decision prohibits the sale of any interest in US independent refiner Citgo, Venezuela's most valuable overseas asset, after the country's creditors won a key US court victory in the pursuit of unpaid debts.

"Given this measure, Citgo and all of its assets are protected," Venezuela's National Assembly leader Juan Guaido said in a tweet. "In addition, any debt that the regime intends to incur with assets of the nation will be illegal. Anyone who wants to benefit from the crisis will be driven away."

The US and more than 50 western governments recognize Guaido as Venezuela's interim president. Yesterday's designation exempts the interim Guaido government and the National Assembly, as well as humanitarian aid.

Former Canadian mining firm Crystallex is pursuing shares of Citgo to satisfy a $1.4bn arbitration award against Venezuela. The Venezuelan opposition lobbied the US to block any such transfer following last week's ruling by the US Third Circuit Court of Appeals upholding Crystallex's efforts. The decision could lead to an auction of the controlling company's shares, a move that has rattled lenders and affirmed a path for companies seeking payment for more than $150bn in arbitration awards and other debt.

Crystallex did not have an immediate comment. Licenses exempting certain business — including those for PdV-owned US independent refiner Citgo and Chevron's minority stake in a Venezuelan synthetic crude joint venture with PdV — remain in place. Most licenses allowing for winding down business with Venezuelan government entities have expired. The new requirements extend prohibitions against financial transactions beyond the Office of Foreign Assets Control's (Ofac) specially designated nationals and blocked persons list (SDN).

Guaido has installed directors of Citgo and PdV, an action upheld by the Delaware Chancery Court late last week. But the opposition leader has not expanded his control inside Venezuela, and an attempt to depose President Nicolas Maduro's government fizzled out earlier this year.

Trump and his administration officials previewed the executive order as an economic "embargo" against Venezuela. Under that interpretation, Venezuela joins Iran and Cuba on a short list of countries the US has placed under an economic embargo that would discourage other countries from doing business with those nations.

But Trump's order does not impose secondary sanctions and is limited to Venezuelan government assets in the US, according to Doug Jacobson, partner in law firm Jacobson Burton Kelley.

Trump's order was issued ahead of today's conference on Venezuela in Lima, Peru, where governments that recognize Guaido as leader will discuss plans for Venezuela's political transition and economic recovery. The US and other donors are due to unveil extensive plans for restoring Venezuela's battered oil sector and economy once Maduro steps down and Guaido takes over as president.

"Maduro is hoping to wait out the international community and the people of Venezuela," US national security adviser John Bolton said at that conference. "We show here today that the international community remains steadfast in its commitment to increase the pressure and accelerate a peaceful transition to Venezuela's only legitimate government institution, the National Assembly."

But the prospect of a government transition in Venezuela remains remote as Maduro maintains control over the country. And the US administration has had to contend with the possibility that the Venezuelan assets under Guaido's control may have been lost to debt-holders.

The US imposed sanctions on Venezuela in January to cut off revenue to the Maduro government and support new elections. US crude imports from Venezuela, once the third-largest supplier of heavy, sour crude, fell to zero in May.