OFAC Targets Venezuelan Individuals and Companies for Sanctions Relating to PDVSA Embezzlement Scheme

On January 8, the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Venezuelan individuals and companies that were involved, according to OFAC,

in a significant corruption scheme designed to take advantage of the Government of Venezuela’s currency exchange practices, generating more than $2.4 billion in corrupt proceeds.  This designation, pursuant to Executive Order (E.O.) 13850, targets seven individuals, including former Venezuelan National Treasurer Claudia Patricia Diaz Guillen (Diaz) and Raul Antonio Gorrin Belisario (Gorrin), who bribed the Venezuelan Office of the National Treasury (ONT, or Oficina Nacional del Tesoro) in order to conduct illicit foreign exchange operations in Venezuela.  In addition to Diaz and Gorrin, OFAC designated or blocked five other individuals and 23 entities, pursuant to E.O. 13850, for their roles in the bribery scheme, and identified one private aircraft as blocked property.

In remarks that accompanied the issuance of the OFAC sanctions, Secretary of the Treasury Stephen Mnuchin stated that “Treasury is targeting this currency exchange network which was another illicit scheme that the Venezuelan regime had long used to steal from its people,” and that Treasury’s actions “expose yet another deplorable practice that Venezuela regime insiders have used to benefit themselves at the expense of the Venezuelan people.”

The facts underlying these sanctions relate directly to the criminal prosecutions that the United States Department of Justice has been conducting against key members of the Venezuelan elite for their roles in a currency-exchange scheme that resulted in embezzlement of more than $1.2 billion from Venezuelan state-owned oil company Petróleos de Venezuela, S.A. (PDVSA).  In addition to the seven individuals, OFAC listed 23 companies and a Dassault Mystere private aircraft as being designated or blocked for being owned or controlled by those individuals.

Note: This latest cluster of OFAC sanctions is yet another in the continuing series of sanctions and prosecutions that the Trump Administration is directing at Venezuela’s Boliburguésia and their support network.  The Treasury announcement specifically stated that “sanctions are intended to change behavior,” and that the United States Government “has made it clear that we will consider lifting sanctions for persons designated under E.O. 13692 or E.O. 13850 who take concrete and meaningful actions to restore democratic order, refuse to take part in human rights abuses, speak out against abuses committed by the government, and combat corruption in Venezuela.

None of that, of course, is likely to take place in the near term, now that President Nicolás Maduro is about to be sworn in for a second six-year term in office.  It is also increasingly unlikely to take place in the longer term.   Even if the United States maintains its enforcement pressures in the Maduro government, and more of Venezuela’s neighbors express their dissatisfaction with the regime’s policies and their disastrous effects on the country, Russia has been demonstrating its resolve to support Maduro and his government in a variety of ways.  They reportedly include $1.5 billion in cash via loans and bailouts for the cash-starved country, in exchange for Russian ownership of significant portions of at least five Venezuelan oil fields, “30 years’ worth of future output from two Caribbean natural-gas fields,” and taking of 49.9 percent of Venezuela-owned Citgo as collateral for the loans.  They also include provision of Russian advisors who have been assisting Venezuela in avoiding bankruptcy, and who helped in the introduction of the controversial Venezuelan digital currency, the Petro.

More recently, the Russian government sent two strategic bomber aircraft capable of carrying nuclear weapons to Venezuela, in a show of support clearly intended to bolster the Maduro regime and infuriate the United States.  According to several recent reports, Venezuela has agreed to allow Russia to establish an outpost on the Venezuelan island of La Orchila where the nuclear-capable bombers could be based.  Creation of that outpost would indicate the depth of Russia’s commitment not merely to make Venezuela a long-term client state and relieve the United States’ economic and enforcement pressures on the Maduro regime, but to establish an overt military presence in Latin America whose influence, even if purely symbolic, could be felt throughout the region.

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