Trump’s Hostility Towards Cuba Provides Opportunities for Russia              

As noted in previous posts, President Donald Trump in only one year in office has expressed hostility towards Cuba in various ways. Those actions have created opportunities for other countries to increase their connections with Cuba and thereby damage U.S. business relations with the island and potentially U.S. national security.

Opportunities for Russia

The foremost beneficiary of these U.S. changes has been Russia.

On December 16, in Havana Cuba President Raúl Castro and Economy Minister Ricardo Cabrisas met with the head of Russian oil company Rosneft, Igor Sechin, for discussions about increasing Cuba’s purchases of oil from Rosneft and modernizing the island’s oil refinery in Cienfuegos. Also participating in the meeting was Mikhail L. Kamynin, Russian ambassador in Cuba.[1]

This May Rosneft started shipping some oil to Cuba, the first significant such sales since the early 1990s. The resumption of this relationship is in response to the U.S. hostility and discouraging U.S. business with the island and to the significant reduction of Venezuela’s shipments of such products to Cuba and the resulting shortages of fuel and electricity for Cubans.

Other Russian beneficiaries are Avtovaz, Russia’s biggest carmaker; KAMAZ, Russia’s largest truck manufacturer; and Sinara, a large locomotive manufacturer. Next month Avtovaz will ship 300 new shiny Lada automobiles to Cuba and hopes to ramp up such exports, thanks to financing from Russian government development bank VEB. Last month Sinara delivered the first of 75 locomotives worth $190 million ordered by Cuba in 2016.[2]

In addition, Russian Railways (RZD) is negotiating to upgrade more than 1000 km of Cuban railroads and to install a high-speed link between Havana and the beach resort of Varadero, in what would be Cuba’s biggest infrastructure project in decades worth $2.26 billion

Aleksandr Bogatyr, Russia’s trade representative in Cuba, said that there Has been a “renaissance” as he forecast bilateral trade could grow to $350 million to $400 million this year, one of its highest levels in nearly two decades, up from $248 million in 2016.

A major obstacle to all of these deals is Cuba’s lack of cash and Russia’s own economic problems. Yet in 2014 Russia forgave 90 percent of Cuba’s $35 billion Soviet-era debt and started providing export financing to Russian companies looking to sell to the cash-strapped island.

An outsider to the Russian connection, Jason Marczak, Director the U.S.-based Adrienne Arsht Latin America Center, observed, “Russia sees it as a moment to further its own relationship with Cuba” and “the more the Russian footprint increases in Cuba, the more that will reinforce hardened anti-U.S. attitudes and shut out U.S. businesses from eventually doing greater business in Cuba.”

Challenge to U.S. National Security

All of this also represents a national security challenge to the U.S. This April a group of high-ranking military officers wrote an open letter to the Trump administration urging continuation of the U.S. opening with Cuba. One of the letter’s signatories, retired U.S. Army Brig. Gen. David L. McGinnis, said, “If Russia is willing to offset oil supplies from Venezuela and some other things, maybe Cuba doesn’t have much of a choice but to let them re-establish political warfare operations there.”

This general Russian threat to the U.S. is recognized in the National Security Strategy of the United States of America that was released on December 18. At the very start on page 2 it states,, “China and Russia challenge American power, influence, and interests, attempting to erode American security and prosperity. They are determined to make economies less free and less fair, to grow their militaries, and to control information and data to repress their societies and expand their influence.” This was made specific with respect to Cuba  on page 51 with the following statements: “In Venezuela and Cuba, governments cling to anachronistic leftist authoritarian models that continue to fail their people. Competitors have found operating space in the hemisphere. . . . Russia continues its failed politics of the Cold War by bolstering its radical Cuban allies as Cuba continues to repress its citizens.”  (Emphases added.)

The U.S. National Security Strategy reacts to the Russian challenge by saying that  the U.S. with Canada and “key countries in the region . . . . will build a stable and peaceful hemisphere that increases economic opportunities for all, improves governance, reduces the power of criminal organizations, and limits the malign influence of non-hemispheric forces. . . . We will catalyze regional efforts to build security and prosperity through strong diplomatic engagement. We will isolate governments that refuse to act as responsible partners in advancing hemispheric peace and prosperity. We look forward to the day when the people of Cuba and Venezuela can enjoy freedom and the benefits of shared prosperity, and we encourage other free states in the hemisphere to support this shared endeavor. (Emphases added.)

But this presidential document fails to acknowledge that this Russian involvement was precipitated, in part, by the Trump Administration’s own hostility towards Cuba and that a continuation of normalization of relations with Cuba would not have provided “operating space” in Cuba for “competitors” like Russia.[3]

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[1] Reuters, Cuba’s Castro and Russian Oil Executive Meet in Havana, N.Y. Times (Dec. 17, 2017); Raúl receives Igor Sechin, Granma (Dec. 18, 2017).

[2] Reuters, Cuba Boost Trade Ties with Cold War Ally Russia as U.S. Disengages, N.Y. Times (Dec. 19, 2017).

[3] White House, National Security Strategy of the United States of America (Dec. 2017).

 

 

 

Cuba’s Economic Ties with Venezuela Are Fraying

The Wall Street Journal reports that the economic ties between Cuba and Venezuela are fraying in the midst of the latter’s economic meltdown with triple-digit inflation and the country’s largest currency note (100 bolivars) worth just around 2 U.S. cents on the black market, not even enough to buy a piece of hard candy at a street kiosk.[1]

This development is a major cause of Cuba’s current economic troubles as discussed in another post this day.

The primary precipitating cause of the fraying ties between the two countries is Venezuela’s declining oil output and thus declining oil shipments to Cuba. Daily shipments of 115,000 barrels of subsidized Venezuelan oil in 2008, says the Journal, “have dropped to about 55,000 a day this year, forcing Cuba this November “to buy oil on the open market for the first time in 12 years.”

In the earlier prosperous years Venezuela restarted and expanded an oil refinery in Cienfuegos, Cuba, making it the city’s largest employer. “Now the refinery sits idle. The last Venezuelan oil tanker docked here in August, according to oil traders. The shutdown has already sharply raised the cost of living for many residents, who had relied on cheap gasoline smuggled out of the refinery to alleviate hardship.”

Venezuela’s economic crisis also has forced it to reduce its payments to Cuba for the latter’s doctors serving in the former, resulting in the return of thousands of the doctors to Cuba. At its peak, 65,000 Cuban medical staff worked in Venezuela, but at the end of this May there only were 38,300, which was 4,000 fewer than three years ago.

Cuba’s exports of services, mostly such medical missions to Venezuela and elsewhere, fell 15% to $470 million last year from 2013, according to government statistics.

In addition, “Cuba’s flagship airline, Cubana de Aviación, stopped regular flights to Caracas earlier this year. Charters from Caracas to Havana have scaled back too as demand slumped.”

On the surface the two countries continue to pledge solidarity with each other. After Fidel Castro died last month, Venezuela’s government declared three days of national mourning, and its President Nicolás Maduro and a large delegation of high officials spent several days in Cuba to pay respects. He sat to the right of Raúl Castro, Cuba’s president and the elder Mr. Castro’s successor, at the memorial ceremony in Havana, fighting back tears before his turn came to speak to the crowds. Maduro then told the crowd, “Raúl, count on Venezuela. We will carry on the path of victory, the path of Fidel.”

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[1] Kurmanaev, Cuba and Venezuela’s Ties of Solidarity Fray, W.S.J. (Dec. 13, 2016); Assoc. Press, Venezuela Unveils 6 New Bills Amid Galloping Inflation, N.Y. Times (Dec. 7, 2016).