On May 21, President Trump issued a new Executive Order (E.O.) “Prohibiting Certain Additional Transactions with Respect to Venezuela.” The new E.O. targets the Venezuelan Government’s ability to factor receivables and liquidate equity interest in exchange for cash.
The E.O. prohibits U.S. persons or persons within the United States from all transactions related to, or providing financing for, and other dealings—including evading, avoiding or conspiracy transactions—in:
- The purchase of any debt owed to the GoV, including accounts receivable;
- Any debt owed to the GoV that is pledged as collateral after the effective date of the E.O. (i.e., May 21, 2018); and
- The sale, transfer, assignment, or pledging as collateral by the GoV of any equity interest in an entity in which the GoV has at least 50% interest.
Consistent with previous sanctions, the E.O. also defines the term “Government of Venezuela” (GoV) as any political subdivision, agency, or instrumentality thereof, including the Central Bank of Venezuela, and Petróleos de Venezuela (PDVSA), as well as any person owned or controlled by, or acting for or on behalf of, the GoV.
The new measure further tightens already existing financial sanctions against the GoV in effect since August 2017. In particular, the new E.O. is expected to directly restrict PDVSA’s ability to engage in accounts receivable financing, which may accelerate the oil company’s liquidity struggles.
For more details on the E.O. issued on August 24, 2017, see Crowell & Moring’s Client Alert.