Venezuelan oil might be behind Cuba’s pivot to the U.S.

Venezuelan oil might be behind Cuba's pivot to the U.S.
BY MIMI WHITEFIELD MWHITEFIELD@MIAMIHERALD.COM
12/18/2014 8:44 PM 12/18/2014 11:05 PM

After 53 years of acrimony, a motivating factor in Cuba striking a
historic deal with the United States to renew diplomatic relations might
have been Venezuelan oil.

Both sides, of course, were eager to see their prisoners released —
USAID contractor Alan Gross and a CIA agent in the U.S. case and the
three Cuban spies that Cuba wanted freed. But analysts say there were
also other factors that pushed the two countries toward their surprise
agreement.

Venezuela currently ships 100,000 barrels of subsidized oil to Cuba
daily and it has been a lifeline for Cuba. In exchange, Venezuela
receives thousands of doctors, teachers and some military advisers.

But with falling oil prices eating into Venezuelan revenue, high
inflation, food shortages and a newly minted law from Washington
sanctioning Venezuelan officials who engaged in human rights abuses,
things are not going well for Cuba's ideological soul mate.

It's not so much a question of Venezuela not wanting to help Cuba but
more of how long it will have the capacity to continue.

"Given the economic disaster in Venezuela today any rational person
dependent on Venezuelan financial support would have to be looking at
other options," said Cynthia Arnson, director of the Latin American
program at the Woodrow Wilson Internatonal Center.

Cuba needs 150,000 barrels of oil daily and produces 50,000 barrels
itself. The subsidized Venezuelan oil adds up to around $3 billion a
year, said Jorge Piñon, who heads the Latin American energy program at
the University of Texas at Austin.

"I think there will come a time when Venezuela says it can no longer
support PetroCaribe," he said. PetroCaribe is Venezuela's alliance with
Caribbean states that allows them to get oil under highly favorable
terms. "And I think President [Nicolás] Maduro will write off everyone
else before Cuba."

But with the Venezuelan economy on the ropes, he said, there is a
possibility of an economic collapse and a change in government that
might not be as friendly with Cuba.

The problem, said Piñon, is Cuba "has all of its eggs in one basket and
that is Venezuela. Cuba faces the same risk today that it faced after
the collapse of the Soviet Union in the early 1990s when it had all its
eggs in the Soviet basket, he said.

"The Cubans learned lessons during the special period [a time of extreme
austerity in Cuba after the Soviet collapse]," Piñon said.

So it doesn't surprise him that Cuba is interested in a more robust
economic relationship with the U.S. "To me, the relationship with the
United States is an insurance policy against a potential Venezuelan
collapse," he said.

Other oil producers that Cuba is friendly with — Russia, Brazil, Angola
and Algeria — also don't have the financial capability to give Cuba
subsidized oil, he said.

"For Cuba, the only possible short-term replacement for Venezuela might
be increased remittances and travel from the U.S.," said Peter Hakim,
president emeritus and senior fellow at the Inter-American Dialogue.

Among the steps outlined Wednesday by President Barack Obama to open a
new era of relations with Cuba are increasing the level of quarterly
remittances that might be sent to Cuban nationals from $500 to $2,000 as
well as new rules that should make it easier for more Americans to
travel to Cuba.

Another potential solution is for Cuba to discover major new oil finds.
But foreign oil companies that have drilled off Cuba's north coast in
recent years have been disappointed.

There is another area, however, where there are potential deep-water oil
reserves — the Eastern Gap, an area far off the coast of Naples in the
Gulf of Mexico.

In its announcement of its new Cuba policy, the White House said it was
"prepared to invite the governments of Cuba and Mexico to discuss shared
maritime boundaries in the Gulf of Mexico."

"Mexico and the United States are getting close to working in the
Eastern Gap," Piñon said.

While there's an understanding that all three countries share the
Eastern Gap, which is in international waters, the boundaries for each
country still haven't been delimited.

Even though its friends are having their own economic woes and economic
growth in Cuba is estimated to come in at an anemic 1.3 percent this
year, Pedro Freyre, an international lawyer at Akerman and an expert on
the embargo, said he is isn't convinced that Cuba's ailing economy
played into the timing of the agreement between the U.S. and Cuba.

"It is true that Venezuela is really up against it and the wheels are
coming off," said Freyre, "but the Cubans have long planned for an
economy without the United States. The U.S. as a replacement for
possible lost economic ties with Venezuela? That's not the way they think."

For him, the timing of the move to renew diplomatic relations is a "tale
of two lame-duck legacies" — that of Obama as he finishes his second
term and of Cuban leader Raúl Castro who has said he wants to retire in
2018.

"Since he took over from Fidel, Raúl has said he wants to mend fences
with the United States but no one believed him," Freyre said. And Obama
had long said he wanted to take major steps to improve relations with
Cuba. Gross' continued imprisonment had become a roadblock to the process.

When secret high-level negotiations between Cuba and the United States
began 18 months ago, freeing Alan Gross was the United States' primary
goal, said Hakim.

"Initially his imprisonment was an obstacle to improving relations with
Cuba but as the talks progressed, he became a vehicle that allowed this
agreement to happen," Hakim said.

Another reason why the announcement might have come at this moment in
time is because the stars lined up correctly — the mid-term elections
were over, the new Congress has yet to be seated and it's still a few
months before "presidential politics overwhelm the Washington
decision-making process," said Hakim.

With the Summit of the Americas in April, the Obama administration
wanted to show a "quantum change'' in U.S. Cuba policy, said Peter
Kornbluh, director of the Cuba Documentation Project at the National
Security Archive. The U.S. has been under fire around the hemisphere for
its policy of isolating Cuba.

The administration also might have wanted to move forward now to get out
in front of anything the new Congress might do on immigration reform.
The Republicans will control 54 of 100 seats in the Senate next year and
hold 247 of 435 seats in the House.

In previous discussions about immigration reform, the Cuban Adjustment
Act, which allows Cubans who reach U.S. soil to become paroled into the
United States and then permanent residents a year later, hasn't been on
the table.

Now the context is different, but Freyre sees no indication it will be
added to whatever immigration legislation emerges. Some members of the
South Florida delegation have talked about tweaking the act so that
Cubans who become adjusted can't return to Cuba on trips for a set
period of time but they want to keep it in place.

"It would be horrendously unpopular in Miami to touch it," Freyre said.

Hakim also thinks a change is unlikely: "There may be some in the
administration that want to see a change in Cuban immigration policy but
right now it's a hotter issue than the embargo."

Miami Herald Staff Writer Jim Wyss contributed to this report.

http://www.miamiherald.com/news/nation-world/world/americas/cuba/article4651707.html