U.S. Sanctions on Venezuela: What Investors Can Legally Do

Understanding the Sanctions Landscape

U.S. sanctions on Venezuela represent the single most important legal consideration for any foreign investor contemplating Venezuelan opportunities. These sanctions are complex, frequently updated, and carry severe penalties for violations. Understanding them is not optional—it's essential.

This guide provides an overview of the sanctions framework, what activities are restricted, what remains permitted, and how investors can approach compliance. However, this is not legal advice. Any significant Venezuela investment requires consultation with qualified sanctions counsel.

The Evolution of Venezuela Sanctions

U.S. sanctions on Venezuela have developed incrementally over more than a decade:

Early Measures (2006-2017)

Initial sanctions targeted specific individuals for human rights violations, narcotics trafficking, and corruption. These "targeted" or "smart" sanctions blocked designated individuals' U.S. assets and prohibited U.S. persons from dealing with them.

Financial Restrictions (2017)

Executive Order 13808 prohibited U.S. persons from dealing in new debt and equity issued by the Venezuelan government and PDVSA. This significantly constrained Venezuela's access to capital markets.

PDVSA Sanctions (2019)

Executive Order 13850 designated PDVSA as a sanctioned entity, broadly prohibiting U.S. persons from transactions with the company. This was the most significant escalation, effectively targeting Venezuela's primary source of foreign exchange.

Additional Measures

Subsequent orders expanded sanctions to cover additional sectors and individuals. The Venezuelan Central Bank, certain gold sector activities, and numerous government officials were targeted.

Recent Developments

The sanctions regime has seen both tightening and selective loosening. Licenses have been issued allowing certain activities, particularly related to humanitarian goods and specific commercial operations. The trajectory continues to evolve based on political conditions.

What's Prohibited

For U.S. persons—including U.S. citizens, permanent residents, entities organized in the U.S., and anyone physically present in the U.S.—the sanctions broadly prohibit:

Government of Venezuela Transactions

• Transactions with the Government of Venezuela
• Dealing in Venezuelan government debt or equity
• Providing services to government entities

PDVSA Transactions

• Any transactions involving PDVSA
• Purchasing Venezuelan oil from PDVSA or PDVSA-related entities
• Providing services, technology, or financing to PDVSA

Designated Persons

• Any transactions with individuals or entities on the Specially Designated Nationals (SDN) list
• This includes numerous Venezuelan government officials, businesspeople, and entities

Debt and Equity

• Dealing in debt or equity of the Venezuelan government
• Trading Venezuelan bonds (with limited exceptions)

Gold Sector

• Certain activities related to Venezuelan gold, though implementation has been inconsistent

What's Permitted

Despite comprehensive sanctions, significant activities remain permitted:

General Licenses

OFAC has issued numerous general licenses that authorize specific activities without requiring individual approval:

Humanitarian Activities: Trade in food, medicine, and other humanitarian goods generally remains permitted. Medical devices, agricultural commodities, and personal care items can be exported to Venezuela.

Personal Remittances: U.S. persons can send personal remittances to individuals in Venezuela.

Telecommunications: Certain telecommunications services to Venezuela remain authorized.

NGO Activities: Humanitarian organizations can conduct authorized activities.

Official Government Business: U.S. government activities and international organization operations continue under authorization.

Specific Licenses

OFAC can issue specific licenses for particular activities not covered by general licenses. The Chevron license allowing certain oil operations is the most prominent example.

Non-Government Economic Activity

Private sector Venezuelan businesses and individuals not connected to the government or PDVSA are generally not sanctioned. U.S. persons can engage in legitimate commercial transactions with non-designated Venezuelan counterparties.

This is crucial: sanctions primarily target the government, PDVSA, and designated individuals—not Venezuelan people or the entire private economy.

Non-U.S. Persons: Secondary Sanctions

Non-U.S. persons face a different but related set of considerations:

Direct Application

U.S. sanctions directly apply to non-U.S. persons in certain circumstances:

• Transactions processed through the U.S. financial system
• Activities conducted while physically in the United States
• Use of U.S.-origin goods or technology

Secondary Sanctions

More broadly, non-U.S. persons engaging in certain significant transactions face potential secondary sanctions—being cut off from the U.S. financial system themselves. Areas of particular concern include:

• Significant transactions with PDVSA
• Support for sanctioned Venezuelan officials
• Gold sector involvement

Practical Impact

Many non-U.S. banks and businesses avoid Venezuelan transactions entirely due to secondary sanctions risk, even where not legally required. This creates practical barriers that go beyond the legal restrictions.

Compliance Framework

Know Your Customer (KYC)

Any Venezuelan business relationship requires enhanced due diligence:

• Verify counterparties are not designated or government-affiliated
• Document ownership structures
• Screen against SDN list
• Maintain records of compliance efforts

Transaction Screening

Every significant transaction should be evaluated:

• Parties involved
• Goods or services
• End use and end users
• Financial routing

Documentation

Maintain thorough records:

• Compliance assessments
• Due diligence documentation
• Transaction records
• Communications

Ongoing Monitoring

The sanctions landscape changes:

• Monitor OFAC updates
• Rescreen counterparties periodically
• Update compliance procedures as needed

Investment Sectors and Sanctions

Different Venezuelan investment sectors have different sanctions implications:

Oil and Gas

Highest Sanctions Impact: Comprehensive restrictions on PDVSA make most oil sector investment extremely difficult for U.S. persons. Specific licenses (like Chevron's) authorize limited activities but are not broadly available.

Mining

Moderate Impact: Gold mining has been specifically mentioned in sanctions, though implementation has focused on government-linked operations. Private mining may have more flexibility but requires careful structuring.

Real Estate

Lower Direct Impact: Private real estate transactions not involving government parties are generally not prohibited. However, payment routing and counterparty verification remain important.

Agriculture

Lower Direct Impact: Agricultural investment in private sector operations typically falls outside sanctions restrictions. Food exports to Venezuela are explicitly authorized.

Private Business

Variable Impact: Starting a business in Venezuela is possible for activities not involving government counterparties. Service and manufacturing businesses serving private sector customers can operate legally.

The Chevron Precedent

Chevron's continued Venezuelan operations provide the most prominent example of authorized oil sector activity:

The License

Chevron operates under a specific OFAC license that authorizes certain activities related to its existing joint ventures in Venezuela. The license has been modified multiple times, with recent expansions allowing broader operations.

Limitations

The Chevron license is specific to Chevron's circumstances:

• Does not automatically apply to other companies
• Covers only specified activities
• Subject to ongoing conditions and potential revocation

Implications

For other investors, Chevron demonstrates that sanctions do not prohibit all Venezuelan oil activity. However, obtaining similar authorization is not guaranteed and requires specific justification.

Penalties for Violations

Sanctions violations carry severe consequences:

Civil Penalties

Strict liability civil penalties can reach hundreds of millions of dollars for significant violations. Even unintentional violations can result in substantial fines.

Criminal Penalties

Willful violations can result in criminal prosecution with penalties including:

• Fines up to $1 million per violation
• Imprisonment up to 20 years
• Corporate and individual liability

Reputational Damage

Beyond formal penalties, sanctions violations can devastate business relationships, banking access, and corporate reputation.

Examples

OFAC has pursued enforcement actions against companies for Venezuelan sanctions violations, including significant settlements with financial institutions and trading companies.

Seeking Authorization

For activities not covered by general licenses, specific OFAC authorization may be available:

License Applications

Applications should include:

• Detailed description of proposed activity
• Parties involved
• Justification for licensing
• Compliance measures

Timing

License applications can take months to process. Plan accordingly.

Denial Risk

OFAC is not obligated to grant licenses. Some applications are denied or receive no response.

Conditions

Granted licenses typically include conditions and reporting requirements.

Practical Recommendations

For U.S. Investors

1. Engage Sanctions Counsel: Before any significant Venezuela activity, consult specialized legal counsel
2. Assess All Touchpoints: Evaluate every aspect of proposed transactions for sanctions exposure
3. Document Everything: Maintain comprehensive records of compliance efforts
4. Stay Current: Monitor sanctions developments continuously
5. Be Conservative: When in doubt, don't proceed without clear authorization

For Non-U.S. Investors

1. Understand U.S. Nexus: Identify any connections to U.S. persons, financial system, or goods
2. Assess Secondary Risk: Evaluate potential secondary sanctions exposure
3. Consider Banking Access: Ensure transactions won't jeopardize U.S. banking relationships
4. Document Compliance: Maintain records even where U.S. sanctions don't directly apply
5. Monitor Your Jurisdiction: Understand sanctions applicable in your home country

For All Investors

1. Due Diligence is Non-Negotiable: Every counterparty, every transaction
2. Structure Carefully: Investment structures should facilitate compliance
3. Plan for Change: Sanctions can shift; build flexibility into arrangements
4. Separate Sanctioned and Non-Sanctioned: Keep activities with sanctions exposure clearly separate from clean activities

Looking Forward

The Venezuela sanctions regime will continue to evolve:

Potential Easing

Political developments could lead to sanctions relief. Negotiations between the U.S. and Venezuelan governments have produced limited licenses, and broader easing remains possible under certain conditions.

Potential Tightening

Conversely, sanctions could tighten in response to political developments. Expanded designations or sector restrictions remain possible.

Investor Implications

Investors should:

• Prepare for various scenarios
• Avoid assuming sanctions will remain static
• Build compliance infrastructure that can adapt
• Maintain relationships with sanctions counsel

Conclusion

U.S. sanctions on Venezuela create a complex compliance environment that investors must navigate carefully. The restrictions are significant but not absolute. Understanding what's prohibited, what's permitted, and how to maintain compliance enables participation in legitimate Venezuelan opportunities while avoiding potentially devastating penalties.

The key takeaways:

• Sanctions primarily target the government, PDVSA, and designated individuals
• Private sector activity with non-designated parties often remains possible
• Compliance requires enhanced due diligence and documentation
• Professional legal guidance is essential
• The landscape continues to evolve

Venezuelan investment can be legally viable with proper structuring and compliance. The challenge is doing the work to get it right.

For broader context on Venezuelan investment opportunities, see our complete guide. Understanding sanctions is essential background for evaluating any specific opportunity, whether in oil, mining, or other sectors.