What is the point of imposing a sanctions regime on the miserable Nicolás Maduro while leaving the backdoor open? This is a relevant question in our view. Venezuela / PDVSA cannot issue more debt according to Executive Order 13808 from August 24, 2017. Recent sanctions against PDVSA establish that debt instruments linked to PDVSA can no longer be traded in the secondary market: “American individuals may continue to hold their shares in debt and equity of PdVSA issued before August 25, 2017, but they are subject to certain requirements about selling those shares in the secondary market. General License 9A generally does not authorize American individuals to purchase or acquire new shares in bonds or equity of PdVSA, and as a result, such purchases are prohibited without OFAC authorization.” [bold added] However, some sovereign debt bonds were not included in this directive.
Additionally, oil imports at Gulf refineries in the U.S. were affected on January 28 by OFAC ruling. U.S.-based energy companies can no longer import oil, while U.S.-based financial companies can no longer trade PDVSA bonds.
However, such a measure leaves the backdoor open, as sovereign debt can still be traded (?), while European, Indian, Turkish, Russian, and Chinese energy companies are licking their chops at the prospect of U.S. energy players exiting the scene. At the time of writing this article, Petrochina, Reliance, and Trafigura are loading crude oil at Venezuelan ports.
Xi Jinping then has no reason to support a transition in Venezuela, when the Treasury measures effectively mean he will receive what is owed to China more quickly. The same applies to Vlad Putin and Ivan Glasenberg, whose company was slated to be sued by David Boies through a sham trust in New York.
And what about leaving sovereign debt outside of sanctions? The gossip on Wall Street is about favoring someone somewhere, so the debt can be bought at a low price.
We’ve seen no shortage of unscrupulous operators looking to make a quick buck off Venezuela’s suffering situation. Let’s hope this isn’t one more.