Photo: The Hill

Donald Trump just signed an Executive Order effective at 12:30 p.m. EDT on May 21, 2018  that prohibits all transactions by a United States person or within the US, related to, provision of financing for, and other dealings in:

  • The purchase of any debt owed to the Government of Venezuela, including accounts receivable;
  • Any debt owed to the Government of Venezuela that is pledged as collateral after the effective date of this order, including accounts receivable; and
  • The sale, transfer, assignment, or pledging as collateral by the Government of Venezuela of any equity interest in any entity in which the Government of Venezuela has a 50 percent or greater ownership interest.

The order also prohibits any transaction or conspiracy formed for the purpose of evading or avoiding, or attempts to violate any of the prohibitions set forth in this order.

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59 COMMENTS

  1. So, other than give more credibility to the “Economic War” cries, what does this accomplish? I read on another web site that this has something to do with interfering with Russia’s ability to do something with its security interest in Citgo? But I don’t get it.

    • “…what does this accomplish?”

      Less bullets to slaughter the people.

      chabizta criminals are surprisingly coward when they find themselves out of ammo.

    • Clarification. Bloomberg uses debts owed TO the Venezuelan government. Financial Times, I believe, gets it right, stating that the new sanction prohibits purchase of debt owed BY the Venezuelan government (including receivables).

      The aim of the sanctions, according to Bloomberg, is to prevent the fire-sale of assets which will be needed to rebuild the economy. Mining concessions, for example. Conoco has apparently already seized refinery assets, but presumably those will be used to do business with Venezuela – much as it was before Conoco assets were “expropriesed”.

      I have trouble seeing why anyone would purchase a debt owed to anyone. E.g. You owe Fred $100 bucks, so I offer to pay you $89 bucks for the privilege of owing Fred $100? The correct “owed BY” makes sense, but I have no idea what that will do to the bonds. Apparently, just glancing at it without having read beyond a couple of few news sources, the bonds will be frozen. You owned them? Now you really own them.

      Someone please correct me I’m reading this all wrong. Venny Trader – you out there to explain what happens to the bonds? I haven’t seen anything that says one cannot receive interest owed.

      • I believe the intention is to not allow the regime to collect the debts owed to them at substantial discounts or sell off assets further at below “market rate”. Pocketing a substantial portion there of.

        If I remember correctly a few years ago Jamaica (or some other PetroCaribe country) paid off some or all of an outstanding debt with apparel. I believe they are trying to leave the next administration with at least a few pennies in the piggy bank.

        • Waltz – Thanks for the explanation. I posted the link to the Financial Times article (below, in reply to Bill Bass) in which they use the word “by”, not “to”. So theoretically, the regime could sell mining concessions in exchange for a promise to pay, then sell that promise to pay at a discount, to someone with ready cash, then let them collect the promise from the original company. Maybe I should read more before I shoot my mouth off, but it seemed odd to me, a very convoluted set of transactions, and it makes much more sense the way the Financial Times has it.

          • Just noticed my link to the Financial Times article is waiting moderation, because they embed their own link it the copied text. Google “new venezuelan sanctions” and the FT article will show up.

          • Also under the assets list would be the claimed US$10 billion in gold, we all know these criminals would have no problem cleaning out. I am doubtful that still it still remains.

            Check out the report just released by insight crime.

      • “I have trouble seeing why anyone would purchase a debt owed to anyone. E.g. You owe Fred $100 bucks, so I offer to pay you $89 bucks for the privilege of owing Fred $100? ”

        It’s more like Fred owes you $100, so I pay you $89 and then I try to get Fred to pay ME $95. You take an $11 haircut but recoup most of your investment, while I turn a $6 profit.

        • Escualidus – Thanks, yes. I had my first yoga class ever today, maybe that has something to do with it, cleared my head of complications. (I’d never thought of buying a debt at a discount – I’d be positively lousy at laundering money!) Also, the official published document signed by President Trump does use owed “TO”, and not owed “BY” the regime, so I guess Bloomberg, and the article today, got it right, and I made the same mistake the Financial Times did, or someone there just made a psychological typo. But thanks for the example, it’s very clear.

  2. Precisely, the collateral of Russian loans to Venezuela is the Venezuela share of CITGO. With this, Russian cannot use that collateral to negotiate further down other financial ”arrangements”. The USA will never allow the Russians to run gas distribution within the USA territory. The Russians will have to give it up for cents to the USA.

  3. This is what was said on Aporrea (google translation):

    “Among the provisions of the Washington resolution is the impediment to settle balances of accounts receivable related to oil. In this way it seeks to attack the main source of income of the South American country. In a telephone conference with journalists, senior officials of the Trump administration explained that these actions are intended to prevent Maduro from selling Venezuelan public assets in exchange for bribes.

    Thus, the executive order prohibits any citizen, institution or US company from acquiring Venezuelan debt or assets and property belonging to the Government of Venezuela in the United States, including those investments derived from Petroleos de Venezuela S.A. (PDVSA). However, the sanctions do not directly attack Venezuela’s oil transactions, so the US It does not prevent the Venezuelan crude oil from being traded in the country, according to Efe news agency.”

    • “Among the provisions of the Washington resolution is the impediment to settle balances of accounts receivable related to oil.”

      That does not seem to match other reports. The reported language of the order appears to prohibit secondary transactions of short term debts (accounts receivable), not the payment of the debts themselves. That would be logically consistent with previous orders which allow payments on existing bonds, just not new bonds. It would not be difficult for PdV and willing vendors to construe longer term debt as AR, thus creating new debt. AR is of course a liability to PdV and thus like debt. The ability to resell AR (e.g. factoring) would facilitate the creation of new and bogus AR.

      • I read parts i and ii as prohibiting third parties from buying debt OWED TO Venezuela, preventing the debt be settled for les than face value, when talking AR of course factoring is what happens, but this also prevents any existing debt in any form to be sold to a third party. Avoiding a fire sale basically.

        And Trump still has some moves left.

        • Yes, but you factor (discount) receivables, not payables. The only way I can see to factor payables would be to estimate that I can negotiate to pay less than the amount owed – for whatever reason – but I certainly wouldn’t pay you for the legal obligation of owing money to someone else unless I knew the bribe for paying anything at all would exceed both the debt actually payed as well as the money I paid you. I think somehow someone didn’t think when they wrote “debt owed to” Venezuela, or it was 7pm and they were dead tired, or they just never understood any economics and finance at all and think that “balancing a checkbook” is a circus-comedy act like balancing plates on the ends of sticks. If you say this prohibits transaction of debts owed BY Venezuela, then it makes sense, that you can’t factor those, that is, you can’t sell $100 of accounts receivable (or debt) for $20 bucks and let the other guy worry about ever seeing any of the $100 owed BY Venezuela. This would also mean that China, for example, could not transfer Venezuela’s obligation to ship it oil to India or Russia or Cuba, because that is a debt owed BY Venezuela. But I don’t know for sure if this will apply to existing debt (seems it would).

          • No, I think you misread me (or I wasn’t clear).

            I mean that if Stupidstan owes Venezuela 100$, Venezuela could offer Crookstonia to give Venezuela $80 and let Crookstonia and Stupidstan work out the rest.

            Though who owes what to Venezuela? Anybody?

          • Robert N. Do not the PetroCaribe countries still owe Venezuela a bundle? See my reply to Gringo above.

          • Roberto N – Got you. Venezuela figures that it can collect $80 from Crookstonia (creative names, btw), but cannot collect from Stupidstan, so it accepts $80 and transfers the right to collect to Crookstonia, which then tries to collect from Stupidstan (and because of locations and laws may actually collect the full $100, pocketing $20 less its costs of collection). Got it. Didn’t occur to me, thanks for the explanation.

      • Sending a whole bunch of Canuckleheads to take over the shuffleboard courts in Boca, further driving you to explode your head a la Wiley E. Coyote?

  4. Davy Jones – I agree, it is confusing, but it is also an Aporrean article that was sourced on a fast take by El Jefe news or some such agency. I had thought maybe, just maybe, that PDVSA gets paid through some intermediary that takes a cut in order to deal with their existing financing/credit problems, and that taking a cut could be structured as buying debt owed for less than the full amount.

  5. If you have a presence in the US even if your are a non US company and the regime offers you to buy from it a bigger propportion of the stockholding of a mixed company sited in Venezuela or part of a company it owns abroad , or its future income streams from any such company or mortgages said income stream in return for money then the sanctions apply ……the intent is to prevent the regime from monetizing any assets or colectibles flowing from its oil operations …..!! it tightens the noose and leaves the regime gasping , there are yet more severe measures which can be taken later on , inch by inch they are making life worse for Pdvsa!! they are sloly strangling the regimes finances !!
    i

    • Aside from the technical that a share of a company is not owed BY the majority shareholder (it is at a capital investment at risk), the theory is still correct, there, as you state it, that this sanction bars purchasing interest in money owed BY Venezuela, and that includes as you clarify, any in-kind production such as oil that Venezuela promises to pay. You no doubt understand more of the practicalities of this than I do. I’m wondering if this bars Venezuela from selling “mining concessions” on the grounds that Venezuela is making a promise to deliver whatever you mine into your possession, or on the grounds that Venezuela owes you the right to mine. I’m foggy on that. But I’m pretty clear that it applies to legal settlements, as in some company sues Venezuela and wins a billion dollars; they are barred from discounting the right of claim to another party or company (that idea was done in the U.S. on an individual basis, that amounts won in settlements were purchased at a discount by some law firm that thought they could collect the full amount for a profit, appeals to the ruling notwithstanding – and I believe that notion was frowned on severely and may have been ruled illegal).

      Could you explain more about how this sanction bars asset sales? I’m too disinterested at this point to look up the actual text of the sanctions, or to read some reporter’s meanderings which may or may not be correct.

    • Here’s the link to the Financial Times article, btw: https://www.ft.com/content/3202dad2-5d27-11e8-9334-2218e7146b04 It states ”
      Please use the sharing tools found via the email icon at the top of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email [email protected] to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found at https://www.ft.com/tour.
      https://www.ft.com/content/3202dad2-5d27-11e8-9334-2218e7146b04

      ” US President Donald Trump stepped up the financial pressure on Venezuela by banning the US purchase of any debts or accounts receivables issued by the socialist government and state-run oil company PDVSA, as Caracas turns to asset fire sales in order to raise desperately-needed cash.”

      Note the “BY” [my emphasis added]. Someone got this wrong, and I suspect that would be articles other than the Financial Times which state “TO”.

    • The post I submitted containing a link to the Financial Times article was not approved for posting, probably because the FT embeds a link to itself in the text, and so it is considered an advertisement. You can Google it, but here’s the transcripted text from The Financial Times: “US President Donald Trump stepped up financial pressure on Venezuela by banning the US purchase of any debts or accounts receivables issued by the socialist government and state-run oil company PDVSA, as Caracas turns to asset fire sales in order to raise desperately-needed cash.” Note that it says “by”, and not “to”.

      The article goes on to say that this may make it harder to trade Venezuelan bonds (which is what I guessed, so I got one right).

      • That makes sense. (Some confusion comes from the fact that one party’s AR is the other party’s AP. Let’s keep in mind that the borrower of concern is Vz.) The reported language of the orders seems consistent – past and present: prevent the flow of new loans to the Vz government.

        The new executive order is probably mostly to clean-up work arounds from the earlier order. Straw PdV AR from phony vendors could easily hide new loans flowing to Vz.

        • Davy Jones – The sanctions order actually is pretty short, in spite of a paragraph or two of references to codes and sections and such. There’s a separate clause in it (I guess it’s called a clause), having to do with sales of assets, so that clarifies how the order prevents sales of mining rights (and probably of discontinued operations, too). Like Roberto N commented above, who thinks in terms of people owing Venezuela money when the regime’s debt is somewhere between $60 billion and $150 billion? One thing for sure, I hope Venezuela – the real Venezuela – comes out of this mess soon.

        • Davy – Btw, the sanctions order states owed “TO” the regime. So I got it wrong, and apparently the FT did the same thing I did, or it was a psychological typo, or something. I checked to see if maybe their article referred to earlier sanctions, but the only date stamp I saw on it was “5 hours ago”, and “2018”. Annoying when publications don’t put a date on things, but maybe they will later if it was published May 21st 2018. Sorry for my mistake.

          • No apology needed. Very revealing that a few posters in this small backwater of the internet raise more pertinent questions and deduce better answers than BigMedia. [Please see news from WSJ, below.]

  6. the question is what Russia can do about this. It has several thousand people in Syria, you know. I homestly do not have a clue.

  7. Why not just offer a cool million bucks for any one of these bastards’ heads and let our hungry police force figure it out?

  8. “What can Russia do about this”???

    If Russia had wanted someone to look out for their interests in the USA, they should have done a better job getting Hilary or Bernie elected. Feel the Bernski!

    • Bingo! Russia and China are highly disinclined to loan any more without external collateral (good luck finding any). China is actively encouraging the IMF to loan new money to Vz so Vz can pay back China’s loans — Hilarious!

  9. Might as well post what I just wrote elsewhere before I learned about this executive order here:

    ” Now come the severe economic REAL sanctions (not the personal crap we’ve seen thus far), not just from the USA’s oil/gas business, but even from the EU (Macron is also sick&tired of Kleptozuelan drugs) and some Peru 12, notably Macri in Argentina, from Chile and Colombia after Duque wins. Heck, even Canada and India (big Oil customer) might tighten a few nuts&bolts.

    When that doesn’t work, as it didn’t with Cuba, (because Kleptozuela can still bribe the military and its Chavista basic thugs with Drug Trade cash) who knows. IF the US Administration and others think its it THEIR INTEREST to briefly intervene militarily, IF Kleptozuela continues to be too big of a headache with its evil Russia/China ties and Hezbollah Terrorist connections, plus huge drug trade worldwide, THEN we might see some fireworks, a few dozen Seal Team 6 marines, a few choppers and some international tanks around the borders, plus a Caracas juggernaut. From an International Coalition, led by the US. Something quick and well coordinated with inside military malcontents and some MUD leaders. To get the hell out fast after the DEA grabs Cabello, Padrino, Tarek and a few more.

    I doubt people protests will be enough, even after the economic situation gets 10 x worse after REAL, severe economic sanctions. Chavismo won’t implode either, they risk jail. They will have to kicked out by force, or it’s Cubazuela forever. Luckily for Venezuela, Pompeo doesn’t fool around, as I mentioned many times here before. Kleptozuela ain’t little Cuba or Bolivia. It’s too big, geo-politically and economically to be left alone for OUR US Interests and those of other civilized nations, the UK, Australia, even Japan and Uruguay, even Mexico wants Chavismo out. For their own interests.

    • cleptozuela doesn’t have nukes, as opposed to castro during the missile crisis, the actual reason of the castro-communist regime’s survival.

  10. This btw is just the tip of the iceberg. Gas/Oil are already in the works with Conoco, etc. Then comes India, oil shut down. An avalanche of countries will follow with real sanctions, starting with Chile and Argentina in LatAm, France and the UK, and so forth. The International economic strangulation of the Kleptozuelan Genocidal Tyranny has just commenced. Then come a few boots on the ground, if/when necessary.

  11. Perhaps less guess work:

    From the Wall Street Journal — ” ‘This executive order closes down a different set of loopholes that we saw the regime attempting to exploit,’ said a senior Trump administration official, adding that other countries in the hemisphere had taken similar actions Monday and that the U.S. believed that Mr. Maduro’s government would see its ability to make such sales ‘severely circumscribed’ as a result.”

    Looks like just a follow-up detail of the earlier orders.

  12. Recent history shows that this kind indirect pressure has been surprisingly effective at putting Vz on a cash basis with most of the world. However, I must say that it has less meaning each day as the cuban and chavista enchufados squeeze the remaining life and prosperity out of the Venezuelan people.

    One must believe that measures like these executive orders, if implemented by Obama eight years ago, could have substantially reduced the sovereign debt which will burden future generations.

  13. Part of the fiendish character of these sanctions is that they are couched in terms which allow for different interpretations , the exchanges above are evidence of this , thus whoever contemplates doing any transaction with the regime will be stymied by the possibility of a US treasury interpretations that can make it the object of sactions it did not bargain for ..so the end results is making them stay away from the transaction , because of the uncertainties and risks involved even if technically speaking they might be able to argue that they dont apply to their transaction , the other perverse effect is that if they do go thru the transaction they will include caveats and conditions that make the transaction less favourable to the regime or which put a ‘risk premium’ on whatever they get from the regime as part of the transaction ……!! These sanctions are cunningly constructed to create the maximum havoc on the regimes finances whatever way you try to interpret them…!!

    • No, the exchanges above were mostly based on erroneous press reports. The executive orders are very straight forward, clearly designed to close loopholes and work-arounds of the earlier order, as stated. What’s fiendish about reducing the murderous castro/chavista access to new credit?

      The executive orders to date have very effectively moved PdV toward cash and carry. And they continue to receive plenty of cash for oil deliveries. Why should the enchufados be allowed to burden Venezolanos with more sovereign debt while not using the cash to feed the country?

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