The United States vs. Venezuela: DDTC Says It Will Soon Deny All Licenses. Will There Be More Restrictions on Commercial Items?

On May 15 the State Department notified Congress that Venezuela is now on the list of terrorist countries (“countries not fully cooperating with the antiterrorism efforts of the United States”). DDTC announced that beginning on October 1, 2006, it will implement a policy of denying all applications for the commercial export of defense articles and services to Venezuela. DDTC also stated that between now and October 1, 2006, it “will continue to carefully scrutinize all proposed arms transfers and sales to Venezuela on a case-by-case basis.” OK, that means you probably won’t get anything approved before October either.

Other elements of the new US policy:

• You may continue to transfer defense articles to Venezuela under ITAR exemptions
• No amendments to Foreign Military Sales cases
• You may continue to use approved licenses and agreements involving Venezuela.

Immediately following the announcement of the new US policy, General Alberto Muller, a senior advisor to Venezuelan President Hugo Chavez, announced that he thinks Venezuela should consider selling their fleet of 21 US made F-16s to Iran. And before the US announced its new policy President Chavez said that he would share some of the fighters with Cuba because the United States was not approving exports to upgrade the aging F-16s.

According to the Associated Press, President Chavez has characterized the recent US actions and policy changes as “a futile campaign to discredit and isolate Venezuela, to destabilize its democratic government and prepare the political conditions for an attack… They want to put Venezuela under conditions so it’s incapable of defending itself.”

(Note to President Chavez and General Muller—I am no military expert, but if you think the US is about to attack, you might want to hold onto those F-16s.)

What about exports and reexport of commercial items to Venezuela? The US Government has not said that it will tighten its controls on exports/reexports of commercial items to Venezuela. But, I would not be surprised to see that happen because the United States put Venezuela on its terrorist country list along with Cuba, Iran, Syria, Sudan, and North Korea. Section 6 of the Export Administration Act, the primary law underlying the Export Administration Regulations, seems to say that the Commerce Department should/may impose Anti-Terrorism (AT) controls on countries on the terrorist list. Licenses are required for AT-controlled items (AT-controlled items are, generally speaking, those items in the xx99x ECCNs such as are 9A991, 9E991, 5A991, 4A994.) And, this old guy can’t remember any cases where the US did not impose AT controls on a country on the terrorist list.

So, even though nobody has said there will be controls on AT items, I would not be surprised to see things might get significantly worse in terms of US restrictions on Venezuela, although you never know what might happen if oil prices were to drop $20 per barrel.