Case No. VENEZUELA-2018-351691-1
Casey Elliott
UBS Limited
c/o UBS AG, Stamford
600 Washington Boulevard
Stamford, CT 06901
Dear Mr. Elliott:
This responds to your request of March 14, 2018 (the “Application”), to the Office of Foreign Assets Control (OFAC), on behalf of UBS Limited, requesting authorization to process a transaction [***] You have advised that UBS Limited held a Petroleos de Venezuela, SA bond [***] on behalf of your client, [***] and that the bond [***] matured on April 12, 2017. The redemption payment on the bond was timely paid in April of 2017 to your client [***], however the coupon payment required a separate transaction. The coupon payment was delayed due to a missing acknowledgement from [***] The payment was sent in May 2017, but it was returned. UBS Limited again attempted to send the payment in November of 2017, and it was held by Sanctions compliance. For this reason, you are requesting authorization to complete this one time transaction to [***] processed by [***]
As you know, on August 24, 2017, the President issued Executive Order 13808 “Imposing Additional Sanctions with Respect to the Situation in Venezuela” (“E.O. 13808”), which prohibits, among other things, engaging in transactions related to, providing financing for, or otherwise dealing in bonds issued by the Government of Venezuela prior to August 25, 2017.
On November 1, 2018, the President issued Executive Order 13850, “Blocking Property of Additional Persons Contributing to the Situation in Venezuela” (“E.O. 13850”), which designated Petroleos de Venezuela, (“PDVSA”).
Furthermore, on August 5, 2019, the President issued Executive Order 13884, “Blocking Property of the Government of Venezuela” (“E.O. 13884”), which blocks all property and interests in property of the Government of Venezuela that are in the United States, that come within the United States, or that are or come within the possession or control of any United States person and may not be transferred, paid, exported, withdrawn, or otherwise dealt in.
Please note, however, that OFAC issued General License 9F (GL9F), dated August 5, 2019, which authorizes, among other things, all transactions and activities prohibited by Section l(a)(iii) of Executive Order (E.O.) 13808 or by E.O. 13850, as amended by E.O. 13857 of January 25, 2019, or by E.O. 13884 that are ordinarily incident and necessary to dealings in any debt (including the bonds listed on the Annex to this general license, promissory notes, and other receivables) of, or any equity in, PDVSA or any entity in which PDVSA owns, directly or indirectly, a 50 percent or greater interest, issued prior to August 25, 2017 (the effective date of E.O. 13808) (together, PDVSA securities), provided that any divestment or transfer of, or facilitation of divestment or transfer of, any holdings in such PdVSA securities must be to a non-U.S. person. In light of the authorization in GL9F, it appears that no specific authorization is required for UBS Limited to complete its transaction to [***]
If you have any questions, please contact the Licensing Division at (202) 622-2480.
Sincerely,
[***] [20191125]
Aydin M. Akgün
Chief, Licensing Division
Office of Foreign Assets Control
1) The applicant seeks authorization to process a coupon (interest) payment related to PdVSA a bond that “matured on April 12, 2017”. According to the guidance letter, the interest payment was initially “was sent in May 2017,” returned, and then sent again in “November of 2017, and it was held by Sanctions compliance.” OFAC determines that no authorization is required to make the payment.
OFAC determines that no authorization is required to process the interest payment. OFAC cites Venezuela General License 9F, which authorizes “that are ordinarily incident and necessary to dealings in any debt…of…PDVSA…issued prior to August 25, 2017.” That the GL authorizes interest payments otherwise prohibited by EO 13884 and EO 13850 (blocking prohibition) is consistent with OFAC’s guidance at FAQ # 661 (“engaging in transactions related to the receipt and processing of interest or principal payments” is covered). However, the GL does not authorize transactions related to “new debt” within the meaning of EO 13808. It appears as though the reason the interest payment was held was due to a position that the lateness of the interest payment rendered the interest payment itself “new debt”. OFAC does not make its reasoning clear, but notwithstanding that the fact that the interest payment would have been late, it was not considered “new debt” because it was a payment obligation that arose from a pre-sanctions contract. See General Note on the Prohibitions on Dealings in “New Debt” of Certain Sanctions Targets (System Ed. Note).