Much has been made about the growing connection between Iran and Venezuela and of the friendship blossoming between their two controversial leaders: Mahmood Ahmadinejad and Hugo Chavez. While the majority of Washington is watching both of these regimes suspiciously, the United States Department of the Treasury Office of Foreign Assets Control (“OFAC”) has been rather quiet.

Aside from a few designations against Venezuelan persons there has been no major action taken by OFAC, the government subagency responsible for administrating the nation’s sanctions programs. However, that might soon change as the media is really starting to pick up on this story and it looks like people are starting to listen. While news of the growing Iran-Venezuela connection has been forthcoming for sometime, it was a recent announcement by famed Manhattan District Attorney Robert Morgenthau which really ignited the buzz on this story. As I wrote a few weeks ago, Morgenthau believes there is something very serious and very sinister going on between Iran and Venezuela and he is planning on using his authority to do something about it by possibly prosecuting a number of Venezuelan banks for violating U.S. sanctions against Iran.

There is an interesting subplot here. On one hand you have a state agency, the Manhattan District Attorney’s office, prosecuting foreign banks under federal sanctions regulations. On the other hand, you have a federal agency, OFAC, which, aside from their designation of a number of persons, has been relatively quiet on the issue. When will OFAC step up and take definitive action? Well, as anyone who works in this field can tell you, OFAC works in mysterious ways. However, that doesn’t necessarily mean they are standing by twiddling their thumbs.

One school of thought, and one I hope is right in its belief, is that the Obama Administration and OFAC are taking their time tailoring a comprehensive sanctions program which will allow for “smart” sanctions to be implemented against the Chavez government. This hopefully would be different from the Iranian Transactions Regulations, which is a country based sanctions program. While this might very well be the case we won’t know for sure until Obama issues an Executive Order directing for sanctions to be imposed against Venezuela. Therefore, for now OFAC is doing what it can do and designating Venezuelan persons who they feel are violating the ITR. Given that Chavez has now promised to export to Iran 20,000 barrels of gasoline per day, it will be interesting to see how the U.S. reacts, and if that reaction will include economic sanctions.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC litigation. If you have any questions please contact him at 202-280-6370 at 202-351-6161 or ferrari@ferrari-legal.com.