Venezuela Sanctions Update

The U.S. asserted that:

• In January 2020, Rosneft Trading S.A. facilitated, on behalf of PdVSA, a shipment of two million barrels of Merey-16 crude oil from Venezuela to West Africa.
• In the fall of 2019, PdVSA planned oil shipments with Rosneft Trading S.A. involving 55 million barrels of crude oil liftings from September to December 2019.
• In September 2019, PdVSA supplied a shipment of one million barrels of Merey-16 to Rosneft Trading S.A., which was loaded on a vessel in Venezuela and destined for Asia.
• In August 2019, Rosneft Trading S.A. negotiated a shipment of two million barrels of Venezuelan crude oil with PdVSA and was able to find a vessel willing to transport the cargo despite difficulties that came with doing business in Venezuela.

The designation of Rosneft Trading S.A., a company registered in Switzerland, again highlights the willingness of the U.S. to designate non-US persons engaged in transactions involving Venezuelan oil.

As we have previously highlighted, all trade with Venezuela in the petroleum sector now poses a risk of sanctions. Members are reminded that Rule 38(h) of our P&I Rules provides for a cesser of a vessel’s entry if that vessel is employed in a carriage, trade or on a voyage which, or the provision of insurance for which, will in any way howsoever expose the Club to the risk of being or becoming subject to any sanctions.

OFAC also issued General License 36 which authorizes, subject to the qualifications as set out in the General License,  “all transactions and activities…that are ordinarily incident and necessary to the wind down of transactions involving Rosneft Trading S.A., or any entity in which Rosneft Trading S.A. owns, directly or indirectly, a 50 percent or greater interest, are, authorized through 12:01 a.m. eastern daylight time, May 20 2020”.

By publication of FAQ 817, it is made clear by OFAC that blocking sanctions do not apply to the entity’s ultimate parent, Open Joint-Stock Company Rosneft Oil Company (Rosneft Oil Company). Further, FAQ 818 clarifies that:

“Non-U.S. persons may wind down transactions with Rosneft Trading S.A. without exposure to sanctions under E.O. 13850, provided that such wind-down activity is:  (i) consistent with General License 36; and (ii) completed prior to 12:01 a.m. eastern daylight time, May 20, 2020.  Entering into new business involving Rosneft Trading S.A. will not be considered wind-down activity.  Non-U.S. persons unable to wind down activities with Rosneft Trading S.A. before 12:01 a.m. eastern daylight time, May 20, 2020, may seek guidance from OFAC”.     

Additional information on this sanctions development can be found in the Freehill Hogan & Mahar client alert and Members can also contact North’s sanctions team at sanctions.advice@nepia.com