Yesterday, the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) announced that it was issuing two revised general licenses issued under the Venezuela Sanctions Regulations (“VSR”), 31 C.F.R. Part 591, and made conforming changes to two previously issued Frequently Asked Questions (“FAQs”). What prompted this action, you ask? An affirmative determination by OFAC that Nynas AB (“Nynas”)–the Swedish manufacturer of synthetic oil and bitumen products–was no longer blocked pursuant to OFAC’s 50 Percent Rule. That affirmative, public determination mooted the authorization contained in Venezuela General License 13E, as well the need for authorizations specific to dealings with Nynas in formerly found in Venezuela General Licenses 3H and 9G.

Although Nynas was not specifically identified by U.S. sanctions targeting Venezuela, it was effectively blocked pursuant to OFAC’s 50 Percent Rule. As regular readers of this blog will know, OFAC’s 50 Percent Rule is an interpretative rule that blocks the property and interests in property under or coming within U.S. jurisdiction or the possession or control of U.S. persons or entities owned 50 percent or greater by a blocked party or in the aggregate by blocked parties. In Nynas’ case, the blocked person who caused it fall under the 50 Percent was its former majority owner, Petroleos de Venezuela S.A. (“PdVSA”), which was blocked pursuant to E.O. 13850 in January 2019.

There are a few takeaways from this action. First, it shows that corporate restructuring is a sure fire way to be delisted–although, I don’t believe every party requesting delisting would be treated in as expeditious a manner as Nynas. Second, it confirms that OFAC will not maintain an authorization where one is not necessary or applicable. Indeed, with Nynas no longer being blocked under the 50 Percent Rule, OFAC was compelled to remove them from general licenses in which they were name or remove the general license issued specifically for them. Although these appear on their face to be minor administrative edits, they speak to a larger tenet or OFAC practice–i.e., that OFAC won’t authorize activity that is not prohibited.

The reason why I even raise this second point is because we often get potential clients–or sometimes even clients–asking if they can obtain authorization for a transaction that is not prohibited. Indeed, someone I spoke to the other day, even referred to it as a “comfort authorization.” While it’s always nice to have something in writing from OFAC that says a particular transaction is allowed. The provision of license authorization where there are no prohibitions implicated or blocked persons involved is not something OFAC does. Nor is it something they can do, as–simply put–OFAC lacks jurisdiction to grant authorization for something that is not prohibited. Now, if there is a lack of clarity as to whether a prohibition applies or not, then OFAC can provide guidance–and potentially authorization if the prohibition does apply–in response to a license application or request for interpretative guidance.

A final note on this action, as of April 3 of this year Nynas was still undergoing a corporate restructuring to remove PdVSA’s interests. Yesterday it was removed, which means that OFAC was able to push through Nynas’ delisting in less than a month. This is a particularly short time table when one considers that OFAC delisting matters typically take years, and even where there is a clear change in circumstances–as there was here–the process usually still takes months from the changes until delisting.

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