U.S. Sanctions Venezuela’s PDVSA for Trade with Iran

By Geraldine Cook
May 26, 2011

On 24 May, the United States announced the imposition of new sanctions on “seven foreign entities,” including the Venezuelan state oil firm PDVSA, for trade with Iran

On 24 May, the United States announced the imposition of new sanctions on “seven foreign entities,” including the Venezuelan state oil firm PDVSA, for trade with Iran.

Petróleos de Venezuela (PDVSA) will be unable to participate in any contract made directly with the U.S. government or have access to U.S. financing programs or technologies.

It will, however, be able to sell oil in the United States and will be able to sell refined petroleum products through its CITGO subsidiary, which has a presence throughout the country, Deputy Secretary of State James Steinberg explained at a press conference.

Approximately 10% of U.S. crude imports come from Venezuela, the world’s fifth-ranking exporter with a million barrels a day, according to official figures.

Washington also imposed sanctions on sixteen other foreign entities, including Chinese firms and firms from other countries, for trade with Iran, Syria, and North Korea that has been linked to the production of weapons of mass destruction or missiles.

The sanctions are being applied under the terms of a 1996 law passed in response to Iran’s controversial nuclear program, which in Washington’s view has the objective of building an atomic weapon.

The measures affect PDVSA, PCCI (Jersey/Iran), Royal Oyster Group (United Arab Emirates), Speedy Ship (United Arab Emirates/Iran), Tanker Pacific (Singapore), Ofer Brothers Group (Israel), and Associated Shipbroking (Monaco).

“Today’s actions add further pressure on Iran to comply with its international obligations,” Steinberg said.

On 23 May, the European Union strengthened its own sanctions against Iran, adding more than one hundred firms to a blacklist of companies affected by an asset freeze, amid efforts to restart international negotiations aimed at getting Teheran to cease its nuclear program.

Steinberg indicated that the United States also imposed sanctions on sixteen foreign entities and individuals, including entities or individuals from China, Belarus, Iran, North Korea, Syria, and Venezuela, as part of an effort to curb the proliferation of weapons of mass destruction.

He added that the sanctions were imposed “pursuant to the Iran, North Korea, Syria, and Nonproliferation Act (…) for their activities in support of WMD (weapons of mass destruction) or missile programs.”

“In the case of PDVSA, the sanctions we have imposed will cut off PDVSA’s access to U.S. government contracts, U.S. export-import financing, and licenses for controlled technologies” in the petroleum area, Steinberg specified.

“These sanctions will not prevent PDVSA’s sale of oil to the United States or other markets, and the sanctions do not affect the operations of PDVSA’s subsidiaries,” he added.

In a telephone press conference, high-level U.S. government sources subsequently specified to reporters that PDVSA had in the past sought access to licenses and import-export financing, although they did not provide details of the level of financial impact those measures are expected to entail.