Washington 'embargoes' Venezuela assets: Update 3

Adds comment from Venezuela.

New US restrictions on Venezuelan finances have stalled recovery efforts by that country's creditors just one week after a major victory in federal court.

An executive order President Donald Trump issued yesterday blocks the sale or transfer of any US assets held by Venezuelan president Nicolas Maduro's government or anyone determined by the Treasury or State departments to assist that regime.

Trade experts said the action lacked sanctions to discourage other countries from a continued relationship with the Maduro government, as administration officials have suggested. But the order immediately prohibited any sale of Venezuelan-controlled US refiner Citgo to satisfy the country's significant debts.

"Given this measure, Citgo and all of its assets are protected," Venezuela's National Assembly leader Juan Guaido said in a tweet. "In addition, any debt that the regime intends to incur with assets of the nation will be illegal."

The decision froze progress former Canadian mining company Crystallex won through a key US court ruling in the pursuit of a $1.4bn arbitration award. Crystallex did not return requests for comment today. Citgo also serves as collateral on a 2016 bond swap for Venezuelan national oil company PdV, which has $842mn in principal due in October.

The US and more than 50 western governments recognize Guaido as Venezuela's interim president. Sanctions imposed in January to cut off revenue to the Maduro government and support new elections dropped US crude imports from the former third-largest supplier of heavy, sour crude, to zero in May. Yesterday's broader designation exempts the interim Guaido government and the National Assembly, as well as spending on humanitarian aid.

Guaido has installed directors of Citgo and PdV, an action upheld by the Delaware Chancery Court late last week. But the opposition leader has not expanded his control inside Venezuela, and an attempt to depose Maduro's government fizzled out earlier this year.

The Trump administration must contend with the possibility that the Venezuelan assets under Guaido's control have been lost to debt-holders. Guaido's government lobbied the US to block any transfer following last week's US Third Circuit Court of Appeals ruling that affirmed a path for companies seeking payment for more than $150bn in arbitration awards and other debt.

Uncertain future

The US previewed the executive order as an economic "embargo" against Venezuela. Under that interpretation, Venezuela joins Iran and Cuba on a short list of nations with which the US has discouraged other countries from doing business. The new requirements extend prohibitions against financial transactions beyond the Office of Foreign Assets Control's (Ofac) specially designated nationals and blocked persons list (SDN). US national security adviser John Bolton told reporters at a conference today in Lima, Peru, on Venezuela's future recovery that companies trading with Venezuela would not be able to trade with the US.

Venezuelan vice president Delcy Rodriguez said the actions "seek nothing less than to completely suffocate Venezuela." Foreign minister Jorge Arreaza called the decision theft.

"Having stolen Citgo and Venezuela's diplomatic offices, the White House and its allies now seek new opportunities and resources to usurp and loot what belongs to over 30mn Venezuelans," Arreaza said.

But Trump's order does not impose secondary sanctions and is limited to Venezuelan government assets in the US, according to Doug Jacobson, partner in law firm Jacobson Burton Kelley. Licenses exempting certain business — including those for Citgo and for Chevron's minority stake in a Venezuelan synthetic crude joint venture with Venezuelan-owned PdV — remain in place.

"We are reviewing the executive order at this time," Chevron said.

Trump's order was issued ahead of today's conference in Lima, where governments that recognize Guaido as leader will discuss plans for Venezuela's political transition and economic recovery. The US and other donors are due to unveil extensive plans for restoring Venezuela's battered oil sector and economy once Maduro steps down and Guaido takes over as president.

"We show here today that the international community remains steadfast in its commitment to increase the pressure and accelerate a peaceful transition to Venezuela's only legitimate government institution, the National Assembly," Bolton said.