US eases sanctions on Venezuela’s telecom sector, excluding Chinese companies
The US Office of Foreign Assets Control (OFAC) has issued two general licenses that ease some sanctions restrictions for Venezuela’s telecommunications sector. At the same time, individuals and companies from China, Russia, Iran, North Korea and Cuba, as well as entities they own, control or operate as joint ventures with, are excluded from the authorized transactions.
As reported by the South China Morning Post, the new authorizations apply, in particular, to transactions with state operator CANTV, mobile operator Movilnet and telecommunications regulator Conatel. Washington had previously applied similar exemptions in the sanctions regime concerning Venezuela’s oil sector.
Equipment and network maintenance
General License No. 61 allows US individuals and legal entities to supply Venezuela with goods, technology, software and services necessary for the installation, maintenance, repair, upgrade and operation of telecommunications infrastructure. The authorization covers equipment and spare parts, fiber-optic capacity, satellite bandwidth, cloud services, data storage, servers, software and network support services.
General License No. 62 permits negotiations on contingent contracts for new investments in Venezuela’s telecommunications sector. This includes establishing new operators, expanding existing operations, joint ventures and participation in public tenders. However, such contracts cannot be performed and capital cannot be invested without separate OFAC authorization.
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Chinese equipment in networks
China’s Huawei and ZTE became important suppliers to Venezuela after sanctions and compliance risks narrowed the ability of other international companies to work with state-linked entities. Venezuelan technology journalist Alcides León said that most of CANTV’s and Movilnet’s technology now comes from Huawei, making a transition away from Chinese suppliers potentially difficult and costly.
According to León’s estimate, Huawei supplies about half of the technology used by Digitel, one of the largest private mobile operators, while Sweden’s Ericsson supplies the other half. He also noted that the new rules could complicate maintenance, repairs and component replacement in networks already dependent on Chinese equipment.
In 2019, CANTV, Movilnet and Huawei signed a $144 million contract to deploy 4G and 5G technologies. The project provided for the supply, installation and configuration of 900 LTE base stations. As Venezuela transitions to 5G, the new US authorizations could create opportunities for European suppliers Ericsson and Nokia, León believes.
