COMMENT: Oil work can be part of US-Cuban rapprochement

May 4, 2009
Two thirds of Cuba’s petroleum demand currently relies on imports, and Venezuela is the single source of these imports under heavily subsidized payment terms.

Two thirds of Cuba’s petroleum demand currently relies on imports, and Venezuela is the single source of these imports under heavily subsidized payment terms.

This petroleum dependency, valued at over $3 billion in 2008, could be used by Venezuela as a tool to influence a future Cuban government in maintaining a politically antagonistic and belligerent position toward the US.

Cuba has learned from experiences and is very much aware of the political and economic risks and consequences of depending on a single source for imported oil. The collapse of the Soviet Union and the 2003 Venezuelan oil strike taught Cuba very expensive lessons.

President Raul Castro understands the risks; his recent visits to major oil exporters such as Brazil, Russia, Angola, and Algeria underscore his concerns. A relationship with Brazil would provide a balance to Cuba’s current dependency, while others could bring with it corrupt and unsavory business practices.

Only when Cuba diversifies suppliers and develops its offshore resources, estimated by the US Geological Survey to be at 5.5 billion bbl of oil and 9.8 tcf of natural gas undiscovered reserves, will it have the economic independence needed to consider a political and economic evolution.

US restrictions

Although Cuban authorities have invited US oil companies to participate in developing their offshore oil and natural gas resources, US law does not allow it.

American oil and oil equipment and service companies have the capital, technology, and operational know-how to explore, produce, and refine in a safe and responsible manner Cuba’s potential oil and natural gas reserves. Yet they remain on the sidelines because of the almost 5-decade-old unilateral political and economic embargo.

The president can end this impasse by licensing American companies to participate in developing Cuba’s offshore oil and gas. Embargo regulations specifically give the secretary of the treasury the authority to license prohibited activities. The Helms-Burton law codified the embargo regulations as well as the secretary’s power, embedded in the codified regulations, to rescind, modify, or amend them. The proof of this is that several years after the Helms-Burton law was enacted, former President Bill Clinton expanded travel and money transfers to the Cuban people and civil society.

Cuba’s future

By seizing the initiative on Cuba policy, the president could claim an early and relatively easy policy success. Critically, he would position the US to play a role in Cuba’s future, thereby giving Cubans a better chance for a stable and democratic future.

A future Cuban government influenced by its energy benefactors would most likely result in a continuation of the current political and economic model. If Cuba’s new leaders are unable to fill the power vacuum left by the departure of the old cadre, they could become pawns of illicit business activities and drug cartels, and the US could face a mass illegal immigration by hundreds of thousands of Cubans.

If US companies were allowed to contribute in developing Cuba’s hydrocarbon reserves, as well as renewable energy such as solar, wind, and sugarcane ethanol, the change would reduce the influence of autocratic and corrupt governments. Most importantly, it would provide the US and other democratic countries with a better chance of working with Cuba’s future leaders to carry out reforms that would lead to a more open and representative society.

The author

Jorge R. Pinon is an energy fellow with the University of Miami’s Center for Hemispheric Policy and former president of Amoco Oil Latin America. He is also an advisor to the Brookings Institution’s US Policy Toward a Cuba in Transition task force.