The move aims to take control of the state-owned oil producer away from the deposed former leader, Nicolas Maduro.

Venezuela is an important source of oil; per 2017 figures from the US Energy Information Administration, it has more proven oil reserves than any other nation. PDVSA is the industry’s dominant player.

The sanctions follow a week of tumult for the South American nation which saw opposition leader Juan Guaidó swear himself in as leader after the nation was gripped by mass protests against President Nicolas Maduro.

Sanctions aimed at transferring power to Guaidó

White House National Security Advisor John Bolton announced the sanctions at a press briefing on 28 January. “We have continued to expose the corruption of Maduro and his cronies and today’s action ensures they can no longer loot the assets of the Venezuelan people,” he said.

Steven Mnuchin, US Treasury Secretary, said the proceeds of any purchased oil would be withheld from Maduro’s government. The company could avoid sanctions, he added, by recognising Guaidó as the new leader.

Mnuchin went on to say PDSVA had long been rife with corruption and misappropriation of state funds. He said sanctions against the firm would only be lifted when Maduro’s regime gave up on controlling the country.

“The path to sanctions relief for PDVSA is through the expeditious transfer of control to the interim president or a subsequent democratically elected government who is committed to taking concrete and meaningful actions to combat corruption,” he told reporters.

Guaidó has also moved to take control of oil production giant PDVSA

The same day, Guaidó directed Congress to start appointing a new board of directors to both PDVSA and its US refining subsidiary Citgo, which is Venezuela’s primary foreign asset.

If sanctions continue to apply to the company, it could face a ruinous bond default that would result in the company being placed in the hands of creditors. Holders of PDVSA bonds are due to receive a US$72 million interest payment in late April, before the bonds mature in 2020.

US President Donald Trump moved quickly to recognise Guaidó as the legitimate leader of Venezuela. More than 20 other nations have also followed suit in accepting Guaidó as the new leader.

Maduro, however, is trying to cling to power and still has the support of the country’s Defense Minister and the allegiance of Russia.