Tag Archives: US-Cuba Relations

October 16-28, 2012 Cuban Missile Crisis: “Fidel Castro, the most dangerous man in the world? “

Posted on October 16, 2012 by Arch Ritter

From the Globe and Mail, October 16, 2012.

Read the complete article here: Cuban Missile Crisis: 50 years ago, the world held its breath for two weeks

Fidel Castro: The most dangerous man in the world

Fidel Castro, the fiery, headstrong Communist revolutionary who had ousted the Americans from Cuba and was transforming the Caribbean island into his personal vision of a modern socialist paradise, was – for a few weeks in October, 1962 – the most dangerous man in the world.

“Kennedy thought he had Castro and the Cubans under control, but he didn’t. And Khrushchev thought he had Castro, under control, but, as he would learn to his horror, he didn’t. Cuba was the intervening variable, the ‘X-factor,’ the outlier, the loose cannon that nearly exploded in the faces of the superpowers in October 1962.”

That except from The Armageddon Letters, a dramatic account of the interplay between three powerful leaders, all of whom failed to understand each other, provides a sometimes chilling, new look at the Cuban Missile Crisis

At one point, Mr. Castro, convinced that the confrontation will inevitably end in a massive nuclear confrontation, pressed his Soviet patron to act, actually pushing for a nuclear first-strike.

Written by James Blight and janet Lang, both at the Balsillie School of International Affairs at the University of Waterloo, the account is based on the exchanges of letters and cables among the three leaders, and presents the psychological imperatives that drove them in the midst of the crisis.

The book is part of an ambitious, multimedia effort to reassess the crisis.

“Given his belief in the inevitability of a U.S. invasion, Castro’s focus on Armageddon is not a nightmare, but a kind of dream. After centuries of irrelevance, Cuba. will matter fundamentally to the fate of the human race,” the authors write.

That sort of megalomania seems more dangerous than the nuclear weapons. Mr. Castro emerges as a nightmare, for both the U.S. and Soviet leaders.

For Mr. Kennedy, dogged by the failure of the Bay of Pigs invasion the previous year, looking weak in the face of Communist expansion represents the gravest danger to his presidency. As for the Soviet premier, The Armageddon Letters reveals his darkest moments come when he realizes his Cuban client is out of control.

Mr. Blight and Ms. Lang write: “This is not a normal situation, with both superpowers poised on the brink of nuclear war. [Khrushchev] becomes convinced at that moment that the situation in Cuba is slipping out of control – out of his control and out of Kennedy’s control. If today a Soviet general violated standing orders and shot down an unarmed U.S. spy plane, then perhaps tomorrow the same general, or another general, might violate standing orders and launch a strategic missile at the United States, thus initiating Armageddon.”

Airstrip at Mariel

Posted in Blog | Tagged , , , , | Leave a comment

Cubans Watching Venezuelan and U.S. Elections; Their Own, Not So Much

Posted on October 5, 2012 by Arch Ritter

By Yoani Sanchez, from the Huffington Post, October 4, 2012.

The original article is here:  Cubans Watching Venezuelan and U.S. Elections; Their Own, Not So Much

Raul and Hugo

What does the voice of Henrique Capriles sound like? A neighbor asked me a few days ago. I didn’t know whether to tell him it was high-pitched or deep, soft or forceful, because the Cuban media is careful not to air it. Instead, we only have the opportunity to hear the agitated shouts of Hugo Chavez, the verbal attacks he throws at his young opponent.

A few days before the Venezuelan elections, our official press has closed ranks around the current occupant of the Miraflores Palace in Caracas. The television commentators assure us that there will be a landslide victory for the Socialist Party and celebrate in advance. But that’s just in front of the cameras; behind the cameras is nervousness, not certainty.

Raul Castro’s government has too much invested in the Venezuelan elections on October 7. Much more than with the dismemberment of the USSR and the conversion of the Eastern European countries. On that occasion, the loss of the Soviet subsidies and the political allies of the socialist bloc submerged the country into a profound material and diplomatic crisis. But within the country the control exercised by Fidel Catro’s regime had the strength — and stubbornness — to withstand the blow.

Today, more than two decades after the fall of the Berlin Wall, little remains of the fervor, the stubborn will, with which we faced what Fidel Castro called The Special Period, a crises presented to us as a necessary sacrifice, a test of ideological fortitude.

There are so many similarities and yet profound differences. The loss of the economic underpinnings from the Kremlin forced Fidel Castro to allow self-employment, the renting of houses, the development of farmers markets, foreign investment, and opening of the Island to international tourism and dollarization.

However, it was precisely the rise to power of Hugo Chavez in 1999 that was the key element to the walking back of these reforms. With a powerful and nearby partner lavishly giving us oil, why continue to deepen the process of relaxations that resulted in a loss of power.

Raul Castro, years later, would retake the path of economic openings that his brother had retracted. This time he would be supported by the Venezuelan subsidy, which has enabled him to implement the few changes slowly in a lukewarm fashion. Perhaps there was a moment when he believed that offering farmers the ability to lease land in usufruct, or expanding licenses for self-employment, would allow Cuba to take its first steps towards economic independence.

Or maybe he always knew that this type of dependency, once established, ends up becoming a chronic situation. More than a circumstance, the need for external subsidy is the core of the Castro regime, the direct result of its inability to successfully manage the national economy.

If, on Sunday, Venezuelans reelect Hugo Chavez as president, Raul’s regime will get some breathing room. But the great polarization in Simon Bolivar’s fatherland will make it more difficult to publicly sustain the maintenance of Cuba. It will no longer be the same.

On top of that, the obvious physical collapse or the expected death of Fidel Castro is an open secret throughout the whole country. His last brief and delirious “Reflections” column was published in the newspaper on June 19. Some say they are only waiting for the end of the Venezuelan elections to put an announcement date on his obituary.

The government in Havana is approaching complicated months. Venezuela’s will be the first in a cycle of three elections that will influence, to a greater or lesser extent, our national life. The presidential election in the United States follows immediately in the list of electoral processes that lie ahead. Mitt Romney has promised a heavy hand with the Cuban authorities, but Barack Obama can also be very caustic to the Cuban system if he deepens his policy of family, academic and cultural approaches.

The first five-year term of Raul Castro will end in February 2013. Few are betting that he’s thinking of retiring to make way for a younger figure. These elections, the third that await us in the coming months, are also the last in importance and in generating expectations. The process of nominating People’s Power delegates and installing them in the National Assembly has already begun, and this body will approve the nominations to the Council of State.

If the Venezuelan results will decide whether we are granted billions in subsidies, and our relationship with our powerful neighbor to the north is in play in those elections, the Cuban elections smell strongly of a play whose script is already written. We don’t even need surveys or voter polls. There is no possibility of a surprise.

Enrique Capriles

 

Posted in Blog | Tagged , , , | Leave a comment

US-Cuba Relations Make Little Progress

Posted on September 26, 2012 by Arch Ritter

By Marc Frank in Havana; Financial Times; September 25, 2012

Original Article here:  US-Cuba Relations Make Little Progress

             US Interest Section, Havana, with black flags blocking view   of billboard messages emitted at the top of the building

When Barack Obama won the US presidency in 2008, many believed he would make significant progress in Cuban relations, so resolving one of the last conflicts of the cold war.

But four years later, US-Cuba relations remain stuck in much the same time warp, and whether Mr Obama or his Republican challenger Mitt Romney becomes the next US president, few expect a significant breakthrough – although the region’s changing ideological landscape could prompt the beginnings of a shift.

Mr Obama lifted all restrictions on Cuban American visits soon after taking office, and in December 2010 reversed a Bush Administration ban that led to a surge in so-called people-to-people visits, which are for educational purposes rather than tourism. But he has also stepped up financial sanctions under anti-terrorism laws, and this year issued tough new travel guidelines.

“The US position on Cuba continues to undercut our strategic position in the region and a breakthrough would greatly enhance Obama’s foreign policy legacy through solving a problem far simpler than many other global issues,” said Julia Sweig, a senior fellow on Latin America at the Washington-based Council on Foreign Relations.

“There is no question that Obama’s first term disappointed many when it comes to Cuba, but I think it premature to assume this status quo under a second term,” she added.

Mr Romney, if he wins, is, meanwhile, expected to tighten travel and adopt a more aggressive public stance towards Havana, encouraged by powerful Cuban-American legislators in the key electoral state of Florida.

The two countries’ latest, seemingly intractable, conflict is over the fates of jailed US contractor Alan Gross and five Cuban intelligence agents. Mr Gross was arrested in 2009 for participating in a US project to set up an internet platform covertly in Cuba. He is currently serving a 15-year sentence.

The Cuban agents were imprisoned in the US 14 years ago for infiltrating exile organisations and military installations in Florida. Following Mr Gross’ arrest, immigration and mail service talks restarted under Mr Obama were again suspended, and US diplomats say there will be no progress until Mr Gross is released.

Another factor limiting improved US-Cuban relations is the conservative tide that washed over Washington after the 2010 Congressional elections and that brought Florida Republican senator Marco Rubio to office and saw another hard-line Cuban American, congresswoman Ileana Ros-Lehtinen, appointed head of the House Foreign Relations Committee. Both lawmakers oppose contact with Cuba and are particularly incensed by people-to-people exchanges.

“This is nothing more than tourism . . . a source of millions of dollars in the hands of the Castro government that they use to oppress the Cuban people,” Mr Rubio charged during congressional hearings last year.

As many as 400,000 Americans visited Cuba in 2011, with as many as 70,000 of them not of Cuban heritage. They may have boosted the government, but were also important clients for the hundreds of small businesses that have opened in Cuba – part of Havana’s broad, if hesitant, market-oriented reforms.

Mr Rubio, according to his office, then blocked the administration’s nominee for undersecretary of state for Latin American affairs, Roberta Jacobson, until it agreed in March to roll back the travel programme. Tougher new regulations quickly followed.

“Under the new guidelines, applications often run to more than 100 pages, compared with just a few when the people-to-people programme began, and they are usually sent back for not meeting vague criteria,” said Bob Guild, vice-president of Marazul Charters, the oldest US company taking people to Cuba.

Although pro-embargo forces are expected to remain a strong influence in Congress even if Mr Obama wins, some advocates of a new Cuba policy hope he will use executive privilege to get round them.

One factor that could change the state of play is if Cuba is taken off the list of state sponsors of terrorism – as the US State Department did with North Korea in 2008 and Libya in 2006 – for helping broker peace talks between the Colombian government and the country’s Marxist Farc rebels. If the Farc lay down their weapons that could help lead to Mr Gross’ release, opening the way for further advances.

 

Posted in Blog | Tagged | Leave a comment

Environmental Defense Fund (EDF), “Bridging the Gulf: Finding Common Ground on Environmental and Safety Preparedness for Offshore Oil and Gas in Cuba

Posted on September 8, 2012 by Arch Ritter

A new comprehensive and well-researched examination of  U.S.-Cuba cooperati9n in petroleum exploration and development  in the Gulf of Mexico has just been published.

The original document has not yet been posted on the Environmental Defense Fund web site (as of September 10, 2012) but it is available here on the Cuba Central site under the heading Not Like Oil and Water – Cuba and the US Can Cooperate on Drilling. 

Authors: Emily A. Peterson, Daniel J. Whittle, J.D., and Douglas N. Rader, Ph.D.

Table of Contents

 Background on EDF’s involvement in Cuba 1

Cuba: crown jewel of the Caribbean 2

High connectivity and shared resources with the United States 4

Cuba’s energy supply and demand: current and forecasted 5

Energy relationship with Venezuela 7

Cuba’s offshore energy sector 8

Cuba’s offshore energy resources 8

Concessions in Cuba’s EEZ 10

Risks of a spill in Cuban waters 12

Projected trajectory of a spill 12

Shared environmental resources at risk 13

Economic assets at risk 15

Oil spill preparedness and response 16

International Offshore Drilling Response Plan 19

Model international agreements on oil spill response 20

Lessons from the Deepwater Horizon spill 21

Environmental impacts 22

Economic costs 23

Technical and regulatory capabilities 23

Public communications 24

National Commission findings and recommendations 25

State of U.S.-Cuba environmental cooperation 26

Current collaborations 26

Constraints on collaborations 28

Path forward: policy recommendations 29

Unilateral actions 29

Bi-lateral engagement 30

 

Executive Summary

 In May 2012, the Spanish oil company Repsol announced it had drilled a dry hole during its deepwater exploration in Cuba. After having spent roughly $150 million on two failed wells in Cuba’s waters (the first being in 2004), the company revealed it would likely exit the island and explore more profitable fields such as those in Angola and Brazil. In August 2012, Cuba’s state oil company announced that the latest offshore exploration project—a well drilled by Malaysia’s state-owned Petronas on Cuba’s northwest coast—was also unsuccessful.

To some, the outcome of three failed wells out of three attempts in Cuban waters may suggest that the threat of a catastrophic offshore spill impacting U.S. waters and the shared ecosystems of the Gulf of Mexico is now moot. To the contrary, the issue is salient now more than ever. Cuba has an existing near-coastal oil industry on its north coast near Matanzas, a near- single-source dependency on imported petroleum from Venezuela, and has exhibited continued strong interest in developing its own offshore capacity. Several additional foreign oil companies are slated to conduct exploratory deepwater drilling in Cuba at least through 2013.

Current U.S. foreign policy on Cuba creates a conspicuous blind spot that is detrimental to the interests of both countries. The United States government enacted stricter regulations governing deepwater drilling in U.S. waters in the aftermath of the Deepwater Horizon oil spill, and has publicly acknowledged a need to better prepare for a potential major spill in neighboring Cuban waters of the Gulf of Mexico. Yet U.S. policy still does not do enough to lessen the likelihood of such a spill or to ensure that sufficient resources will be at the ready to respond to a spill in a timely and effective manner. Beyond their geographical proximity, Cuba and the United States are tightly interconnected by ocean currents and share ecosystems such that a spill in either country could have profound impacts on fisheries, tourism, and recreation in the entire region. Yet, due to longstanding U.S. economic sanctions, international operators working in Cuba are unable to turn northward to the United States to freely access equipment and expertise in the event of an oil disaster.

The purpose of this report is to present EDF’s position that direct dialogue and cooperation between the United States and Cuba on environmental and safety matters associated with  offshore oil and gas development is the only effective pathway to protect valuable environmental and economic interests in both countries. Cooperation now on safety and environmental  preparedness surrounding offshore oil can also lay a foundation for broader constructive engagement on environmental protection and natural resources management in the future.

Principally, this report addresses U.S. policy toward Cuba and makes recommendations for improving environmental and safety preparedness related to offshore oil exploration and development in Cuba. This report is not intended nor does it purport to serve as a comprehensive analysis of Cuba’s domestic energy strategy, policies, laws, or regulations.

Deepwater drilling off the northern coast of Cuba and in many other areas of the Gulf of Mexico poses a potential threat to sensitive and vulnerable marine and coastal ecosystems and to coastal communities. Cuba has a sovereign right to determine whether to exploit oil and gas resources within its Exclusive Economic Zone (EEZ), in the same way other nations do, including Cuba’s neighbors in the Gulf of Mexico, the United States and Mexico. Other Caribbean countries, such as the Bahamas, are also considering offshore oil and gas operations in the future. The underlying reality is that the Cuban government will continue with its drilling activities, with or without the acquiescence of U.S. policymakers.

Therefore, EDF proposes policy recommendations along two dimensions: those that the U.S. government should take unilaterally and those that require the U.S. government to engage in meaningful dialogue and cooperation with the Cuban government. In this report, we recommend the following:

  • Unilaterally, the United States should revise its licensing process to ensure that the resources of U.S. private companies and personnel could be deployed in a timely and comprehensive manner should an oil spill occur in Cuba.
  • On a bilateral level, the U.S. and Cuban governments should create a written agreement similar  to existing agreements with neighbors like Mexico and Canada. Such an agreement should stipulate proactive joint planning aimed at maximizing preparedness and response to prevent or mitigate the consequences of an offshore oil spill. (This agreement would supplement any regional, multi-lateral agreement that may result from ongoing discussions described in this report.)
  • U.S. and Cuban government agencies should fund and facilitate collaborative research on baseline science of shared marine resources in the Western Caribbean and Gulf of Mexico. The high level of connectivity between the two countries underscores that developing baseline science is an imperative that should not wait for a disaster to occur.

These and other recommendations in this report are pragmatic and fully consistent with those put forth by the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling. The co-chair of the commission and former U.S. Environmental Protection Agency (EPA) Administrator, William K. Reilly, concurs that environmental cooperation is as critical to U.S. interests as it is to Cuba’s. “Our priority with Cuba should be to make safety and environmental response the equivalent of drug interdiction and weather exchange information, both of which we have very open, cooperative policies with the Cuban government,” Reilly said.

Finally, we are hopeful that the Cuban government will continue to expand its promising energy efficiency and renewable energy programs, so as to minimize fossil fuel reliance and to mitigate environmental threats on the island and beyond.

Posted in Blog | Tagged , , , | 1 Comment

Cuba’s Economic Problems and Prospects in a Changing Geo-Economic Environment

Posted on July 13, 2012 by Arch Ritter

By Arch Ritter

Below is a Power Point Presentation made at the “Seminar on Prospects for Cuba’s Economy” at the Bildner Center, City University of New York, on May 21, 2012.

The full presentation can be found here: CUNY Bildner Presention, Arch Ritter on Cuba’s Economic Problems and Prospects….”, May 21 2012

Posted in Blog, Featured | Tagged , , , , , , , , , , , , , , , , , | Leave a comment

Yoani Sanchez, “Should the U.S. raise a fist or offer a hand to Cuba?”

Posted on July 13, 2012 by Arch Ritter

July 10, 2012

Yoani Sanchez, CNN

Havana, Cuba (CNN) — In the nineties a certain joke became very popular in the streets and homes of Cuba. It began with Pepito — the mischievous boy of our national humor — and told how his teacher, brandishing a photo of the U.S. president, launches into a harsh diatribe against him.

“The man you see here is the cause of all our problems, he has plunged this island into shortages and destroyed our productivity, he is responsible for the lack of food and the collapse of public transport,” the teacher says.

After these fierce accusations the teacher points to the face in the photo and asks her most wayward student, “Do you know who this is?” Smiling, Pepito replies, “Oh yes … I know him, it’s just that without his beard I didn’t recognize him.”

The joke reflects, to a large measure, the polarization of national opinion with regard to our economic difficulties and the restrictions on citizens’ rights that characterize the current Cuban system. While the official discourse points to the United States as the source of our greatest problems, many others see the Plaza of the Revolution itself as the root of all the failures of the last 53 years.

True or not, the reality is that each one of the eleven administrations that has passed through the White House since 1959 has influenced the course of this island, sometimes directly, other times as a pillar of support for the ideological propaganda of Fidel Castro’s government (and now that of his younger brother Raúl).

Hence the growing expectations that circulate through the largest of the Antilles every time elections come around to decide who will sit in the Oval Office. Cuban politics depends so greatly on what happens in the ballot boxes on the other side of the Florida Straits — and some share the view that we have never been so dependent on our neighbor to the north.

Cuban diplomacy seems more comfortable contradicting America than seeking to solve the problems between the nations, which is why many analysts agree it would be easier for Raúl Castro to cope with an aggressive policy from Uncle Sam than with the more pragmatic approach of Barack Obama.

Obama’s easing of the rules on family remittances, reestablishing academic travel, and increasing cultural exchanges add up to an unwieldy formula difficult for the Castro regime’s rhetoric to manage. But the regime has also tried to wring economic and political advantages from these gestures from Washington.

The real question in this dispute is which approach would more greatly affect democratization in Cuba — to display a fist? Or to offer a hand? To recognize the legitimacy of the government on the island? Or to continue to treat it as a kidnapper holding power over 11 million hostages?

When the Democratic party, led by Barack Obama, came to the White House in January 2009, our official press was faced with a dilemma. On the one hand the newly elected president’s youth and his African descent made him immediately popular with Cubans, and it was not uncommon to find people walking the streets wearing a shirt or hat displaying the face of the former senator from Illinois. It was the first time in decades that some compatriots dared to publicly wear a picture of the “enemy” (the U.S. president) himself.

For a population that saw the top leaders of our own government approaching or passing 80, the image of a cheerful, limber, smiling Obama was more consistent with the myth of the Revolutionary than were the old men in olive green standing behind the national microphones.

Obama’s magnetism also captivated many here as well, and disappointed, of course, those who hoped for a heavier hand toward the gerontocracy in Havana.

Farewell socialism … hello to pragmatism

Beyond the political issues, the measures undertaken by the Obama administration were felt quickly in many Cuban families, particularly in their economy and relations with their exiled relatives in America.

With the increased cash from remittances, the small businesses that emerged from Raul Castro’s reforms were able to use the money coming from the north for start-up capital and to position themselves. Meanwhile, thousands of Cuban-Americans arrived at José Martí airport every week loaded with packages, medicine and clothes to support their relatives on the island.

Those who see the Cuban situation as a pressure cooker that needs just a little more heat to explode feel defrauded by these “concessions” to Havana from the Democratic government. They are the same people who suggest that a hard line — belligerence on the diplomatic scene and economic suffocation — would deliver better results.

Sadly, however, the guinea pigs required to test the efficacy of such an experiment would be Cubans on the island, physically and socially wasting away until some point at which our civic consciousness would supposedly “wake up.” As if there are not enough historical examples to show that totalitarian regimes become stronger as their economic crises deepen and international opinion turns against them.

No wonder Mitt Romney is a much talked about figure in the official Cuban press. His strong confrontational positions feed the anti-imperialism discourse like fuel to a fire. The Republican candidate has been the focus of numerous articles in the official organ of the Communist Party, the newspaper Granma. His photos and caricatures appear in this same daily that was stymied when trying to physically mock Obama. Given the high rate of mixed marriages among Cubans, it’s quite sensitive to enlarge the ears and fatten the lips of the U.S. president without it reading as racist ridicule.

If, in the eighties, the media’s political humor was honed in the wrinkled face of Ronald Reagan, and later the media had a field day with the physique of George W. Bush, for four years it has been cautious with the current resident of the White House. All this graphic moderation will go by the wayside if Mitt Romney is elected as the next president of the United States. There are those who are already laughing over the possible jokes to come.

But whoever scores the electoral victory will find Cuba in a state of change. The reforms carried out by Raúl Castro lack the speed and depth most people desire, but are heading in the irreversible direction of economic opening. Havana is full of private cafés and restaurants, we can now buy and sell homes, and Cubans are even managing to sell the cars given to them during the era of Soviet subsidies in exchange for political loyalty. The timid changes driven by the General President are threatening to damage the fundamental pillars of Fidel Castro’s command. Volunteerism at any cost, coarse egalitarianism, active adventures abroad, and a country kept in a state of constant tension by the latest economic or political campaign appear to be gradually fading into things of the past.

On the other hand, citizens themselves have begun to experience the most definitive of transformations, that which occurs within. Public criticism is on the rise, although it has not yet found ways to be heard in all its diversity, but every day the fear of police reprisals diminishes.

The official media have unquestionably lost a monopoly on the flow of information and thanks to illegal satellite dishes Florida television now comes to Cuba. Alternative news networks circulate documentaries, films, and articles from independent journalists and bloggers. It’s as if the enormous ocean liner of Revolutionary censorship was taking on water through every porthole.

Young people are finally pushing to have Internet access, while the retired complain about their miserable pensions and almost everyone disagrees with the travel restrictions that prevent our leaving and returning to our own country. In short, the illusion of unanimity has fallen to pieces in Raúl Castro’s hands.

To this internal scenario, the result of the American elections could be a catalyst or obstacle for changes, but it is no longer the most important factor to consider. Although the billboards lining the streets continue to paint the United States as Goliath wanting to crush little David who represents our island, for an increasing number of people the metaphor doesn’t play out that way. They know that in our case the abusive giant is a government that tries to control the smallest aspects of our national life, while his opponent is a people who, bit by bit, is becoming more conscious of its real stature.

Posted in Blog | Tagged | Leave a comment

Russians Commence Petroleum Exploration off the Cuban Coast

Posted on June 28, 2012 by Arch Ritter

Nick Miroff,  June 28, 2012;  from Globalpost.com

The Songa Mercur Drilling Platform

HAVANA, Cuba — For 30 years, generous oil subsidies from Moscow kept the lights on for Fidel Castro’s Cuban Revolution. Until the Soviet Union went kaput. Now, Russian state oil companies may be coming to Cuba’s rescue again.

Oil industry journals reported this week that a Soviet-built, Norwegian-owned drilling platform is headed for Cuban waters this summer, under contract with Moscow-based state company Zarubezhneft. The company has hired the rig, called the Songa Mercur, at a cost of $88 million for nearly a year, with plans to begin drilling in November. That should be enough time to poke plenty of holes in search of Cuba’s elusive undersea oil fields, which are thought to hold billions of barrels of crude but have yet to yield a decent strike.

The rig’s arrival couldn’t come at a better time for the Castro government and its state oil company, CubaPetroleo. The state firm has signed multiple contracts in recent years with foreign producers looking to drill in Cuban waters.

Another drilling platform, the Scarabeo 9, has been working off the island’s north coast this year, but has come up dry, dealing a blow to Havana’s hopes for weaning the island off imported crude.

Cuba currently gets about two-thirds of its fuel from socialist ally Hugo Chavez. But the Venezuelan president has been battling cancer and must campaign for re-election in October.

The Scarabeo 9 has been Cuba’s best hope. The Chinese-built, Italian-owned rig arrived late last year, opening a gusher of anxieties in the US. Environmental groups and Florida tourism operators worried about damage from a potential spill. Anti-Castro lawmakers worried an oil strike would give the Cuban government a cash windfall. Repsol, the Spanish oil company that first hired the rig, was the subject of hearings on Capitol Hill, and the Obama administration made the unusual move of sending an inspection team to visit the platform when it stopped in Trinidad en route to Cuban waters. But the state-of-the-art Scarabeo 9 was made for the Cuba job — literally. It is the only rig in the world designed specifically to comply with US trade sanctions against Cuba, which limit the amount of US technology that can be used in Cuban territory to no more than 10 percent.

So far the rig has come up empty in Cubans waters. Having spent more than $100 million for a dry well and a political headache, Repsol executives have announced they’re pulling out of Cuba.

Scarabeo 9 is now in the hands of Russia’s Gazprom Neft, which is drilling in Cuban waters at another offshore location in partnership with Malaysia’s Petronas. Results may be announced as soon as next month.

The Songa Mercur will be working much closer to shore. Built in 1989 at the Soviet Union’s Vybord Shipyards, its maximum drilling depth is just 1,200 feet of water, according to the rig’s specifications.

Jorge Piñon, an expert on Cuban oil exploration at the University of Texas, said the Songa Mercur was retrofitted and modernized in 2006 in Galveston, Texas, after it was purchased from a Mexican firm by Norway’s Songa Offshore SE. It’s currently working in Malaysia.

Unlike the Scarabeo 9, the Songa Mercur is loaded with US technology, including five Caterpillar generators, General Electric mud pump motors, and cementing equipment made by Halliburton. That will likely leave Russian operator Zarubezhneft in violation of the US’ Cuba sanctions, Piñon said.

Not that there’s much the US government can do about it. “This is a Russian state oil company, and they do not have US assets or interests to safeguard,” said Piñon, a former British Petroleum executive. “Do you think that Zarubezhneft is going to invite the US Coast Guard and the Interior Department to board (the Songa Mercur)?” he said. “How then is [the US] going to validate whether the Songa Mercur meets the embargo regulations?” The area where the platform will be drilling is off the coast of Cuba’s Ciego de Avila and Villa Clara provinces, and adjacent to an area that the Bahamas Petroleum Corporation is also looking to develop, Piñon added.

That location should present less of a threat to US beaches in the event of a spill, according to Lee Hunt, former president of the Houston-based International Association of Drilling Contractors. Shallow water does not eliminate the risk, Hunt said, but ocean currents in that area would likely keep floating crude away from US shores. “What has not changed is the need for blowout prevention,” said Hunt, who advocates closer cooperation between the US and Cuba on oil spill prevention. “The best and safest practices, and preparation for spill capping, capture, containment and cleanup remain risk factors for Cuba and the United States.”

Posted in Blog | Tagged , , , | 1 Comment

Presentations from the Bildner Center, (CUNY) “COLLOQUIUM ON THE CUBAN ECONOMY” May 2012,

Posted on June 19, 2012 by Arch Ritter

On May 12, The Bildner Center at City University of New York, under the leadership of Mauricio Font organized a one-day conference analyzing the recent experience of the Cuban economy in its process of transformation.  All of the Power Point presentations from the  “COLLOQUIUM ON THE CUBAN ECONOMY” have been posted on the  Center’s Web Site. The presentations of the Cuban participants, all from the Center for the Study of the Cuban Economy, namely Omar Everleny, Pavel Vidal, Camila Piñeiro, and Armando Nova, are especially valuable and informative as they provide up-to-date and inside analyses of major issue areas. Mauricio, Mario González-Corzo, and the team are certainly to be congratulated for organizing this event

All of the presentations can be be accessed at the Bildner Web Site via the hyperlinks listed below in the form of the program of the conference.

Session #1: Cuban Updates on Actualización

1. Cuentapropismo y ajuste estructural
Omar Everleny, University of Havana

2. Microfinanzas en Cuba
Pavel Vidal, University of Havana

3. Non-state Enterprises in Cuba: Current Situation and Prospects
Camila Piñeiro, University of Havana

4. Impacto de los Lineamientos de la Política Económico y Social en la producción nacional de alimento
Armando Nova, University of Havana

Moderator: Mauricio Font, Bildner Center for Western Hemisphere Studies

Session # 2: Strategic Initiatives: Agriculture

1. Measuring Cuba’s Agricultural Transformations: Preliminary Findings
Mario González-Corzo, Lehman College, CUNY

2. U.S. Food and Agricultural Exports to Cuba – Uncertain Times Ahead
Bill Messina, University of Florida

Moderator: Emily Morris, Economist Intelligence Unit in London

Session # 3: Revamping Socialism: Perspectives and Prospects

1. Actualización in Perspective
Mauricio Font, Bildner Center for Western Hemisphere Studies

2. Cuban Restructuring: Economic Risks
Emily Morris, Economist Intelligence Unit in London

3. Prospects in a Changing Geo-Economic Environment Archibald Ritter, Carleton University, Canada

ROUNDTABLE: Implications and Future Agenda


Posted in Blog | Tagged , , , , , , , , , , , , | 1 Comment

Cuba waits anxiously for oil dreams to materialize

Posted on May 29, 2012 by Arch Ritter

By PAUL HAVEN. Associated Press, May 27, 2012

HAVANA (AP) — It was supposed to be Cuba’s economic savior: vast untapped reserves of black gold buried deep under the rocky ocean floor.

But the first attempt in nearly a decade to find Cuba’s hoped-for undersea oil bonanza has come up dry, and the island’s leaders and their partners must regroup and hope they have better luck – quickly.

Experts say it is not unusual that a 3-mile (4.8-kilometer) deep exploratory well drilled at a cost of more than $100 million by Spanish oil giant Repsol was a bust. Four out of five such wells find nothing in the high-stakes oil game, and petroleum companies are built to handle the losses.

But Cuba has more at stake, and only a few more spins left of the roulette wheel. The enormous Scarabeo-9 platform being used in the hunt is the only one in the world that can drill in Cuban waters without incurring sanctions under the U.S. economic embargo, and it is under contract for only one to four more exploratory wells before it heads off to Brazil.

“If oil is not found now I think it would be another five to 10 years before somebody else comes back and drills again,” said Jorge Pinon, the former president of Amoco Oil Latin America and a leading expert on Cuba’s energy prospects. “Not because there is no oil, but because the pain and tribulations that people have to go through to drill in Cuba are not worth it when there are better and easier options in places like Angola, Brazil or the U.S. Gulf of Mexico.”

A delay would be catastrophic for Cuba, where 80-year-old President Raul Castro is desperately trying to pull the economy out of the doldrums through limited free-market reforms, and has been forced to cut many of the subsidies islanders have come to expect in return for salaries of just $20 a month.

It could also leave the Communist-governed island more dependent on Venezuela, where President Hugo Chavez is ailing with cancer. Chavez provides Cuba with $3 billion worth of heavily subsidized oil every year, a deal that might evaporate if he dies or fails to win re-election in October.

An oil find, on the other hand, would potentially improve Cuba’s long-bitter relations with the United States, some analysts suggest. They say the U.S. oil industry could lobby Congress to loosen the embargo so it could get in on Cuba’s oil game. At the very least, coordination between the Cold War enemies would be necessary to prepare for any spill that could coat beaches in the U.S. and Cuba with black goo.

The Cuban government has not commented on Repsol’s announcement May 18 that the first well came up dry, and declined to make any oil officials or experts available to be interviewed for this article.

Next in line for using the drilling rig in Cuban waters is Malaysia’s Petronas, which holds the rights to explore an area in the Florida Straits known as the Northbelt Thrust, about 110 miles (180 kilometers) southwest of Repsol’s drill site. Wee Yiaw Hin, Petronas’ executive vice president of exploration and production, told The Associated Press that drilling has begun and he expects results by the end of July.

After that, two industry experts said, Repsol is under contract to drill a second well, though it could get out of the deal by paying a penalty to Saipem, the Italian company that owns the rig. Kristian Rix, a spokesman for Repsol in Madrid, said a decision on whether to sink another well was still being evaluated.

Venezuela’s PDVSA and Sonangol of Angola have options to drill next, but are under no obligation if they don’t like their odds. While both countries are strong allies of Cuba, at $100 million a well, the decision to drill will likely be based solely on economics.

Even if oil is found, the Scarabeo-9 is under contract to power up its eight enormous thrusters and sail to Brazil after that, with no date set for its return to Cuba. The bottleneck highlights the difficulties Cuba faces, and why it could be well into the 2020s before the island sees any oil windfall.

“Assuming they’re successful in finding oil, to bring the oil to market will take years of development efforts,” said Victor Shum, an energy analyst with consulting firm Purvin & Gertz in Singapore.

Once an exploratory well finds oil, companies generally drill between 10 and 20 additional wells nearby to get a sense of the reservoir’s size. The process can take several years even under normal circumstances, and circumstances are not normal in Cuba.

The Scarabeo-9 was built in Asia with less than 10 percent U.S.-made parts to avoid violating Washington’s embargo, making it the only rig in the world that meets the requirement. That means no other rig could be used in Cuba without risking U.S. sanction, and the additional wells would have to be drilled by the rig one at a time, with each taking about 100 days to complete. At about three wells a year, it could take up to six years for this second phase – assuming the rig is available.

After gauging a reservoir’s size, an oil company then must assess whether the economics of a field make it a prime spot for exploitation, or whether to concentrate resources elsewhere.

If exploitation does go forward, complicated equipment is required to pull oil from such depths. Several industry experts said the only country that produces the necessary apparatus is the United States, although Brazil and other countries are working to catch up. Unless they do, the oil could not be removed unless the U.S. embargo was lifted or altered.

“A lot of folks are looking at the energy sector in Cuba because they are looking at a Cuba of five years from now, or 10 years from now,” said Pinon. “So a lot of people are betting that either the embargo is going to be lifted, or the relationship between the U.S. and Cuba is going to improve in some way.”

Still, the benefits of hitting a gusher would be enormous for Cuba, and the impact could be felt long before any oil was pumped.

Because of the embargo, Cuba is shut off from borrowing from international lending institutions, and the island’s own poor record of repayment has left most other creditors leery. Cuba, for instance, owes the Paris Club of creditor nations nearly $30 billion.

An oil find could change the game, with Cuba using future oil riches as collateral to secure new financing, economists say. They point to China and Brazil as potential sources of new funding, but say neither is likely to put money into the island without reasonable confidence they will get their investment back.

Lee Hunt, the recently retired president of the Houston-based International Association of Drilling Contractors, said the stakes are enormous for Cuba that one of the wells hits oil before the Scarabeo-9 leaves. Hunt has worked to bring U.S. and Cuban industry and environmental groups together.

“If the only rig you can work with is gone, it’s like somebody took your shovel away,” Hunt said. “You are not going to dig any holes without a shovel, even if you know the treasure is down there.”

Posted in Blog | Tagged , , , , | Leave a comment

The Economist, Special Report on Cuba, March 24, 2012

Posted on March 28, 2012 by Arch Ritter

 

The Castros, Cuba and America; On the road towards capitalism

Change is coming to Cuba at last. The United States could do far more to encourage it.

The Economist has produced one of its excellent surveys, this time focusing on Cuba.

Below are a set of hyperlinks to the various chapters of the Cuba Report. The chapter on the economy is presented following the Table of Contents.

Hyperlinked Table of Contents

  Revolution in retreat; Revolution in retreat

Under Raúl Castro, Cuba has begun the journey towards capitalism. But it will take a decade and a big political battle to complete, writes Michael Reid

  Inequality; The deal’s off

Inequalities are growing as the paternalistic state is becoming ever less affordable

Population; Hasta la vista, baby

The population is shrinking, ageing—and emigrating

The economy: Edging towards capitalism

Why reforms are slow and difficult

Politics; Grandmother’s footsteps

With no sign of a Cuban spring, change will have to come from within the party

Cuban-Americans; The Miami mirror

Cubans on the other side of the water are slowly changing too

After the Castros; The biological factor

Who and what will follow Raúl?

The Economy: Edging towards capitalism

Why reforms are slow and difficult

GISELA NICOLAS AND two of her friends wanted to set up an events-catering company, but that is not one of the 181 activities on the approved list for those who work por cuenta propia (“on their own account”), so in May 2011 they opened a restaurant called La Galeria. With 50 covers, it is a fairly ambitious business by Havana standards. They have rented a large house in Vedado and hired a top chef and 13 other staff who are paid two to three times the average wage, plus tips. The customers are mainly foreign businesspeople and diplomats, Cuban artists and musicians and visiting Cuban-Americans.

“This opportunity means a lot to us,” says Ms Nicolas, who used to work for a Mexican marketing company. “But they haven’t created the conditions for a profitable business.” There are no wholesalers in Cuba, so all supplies come from state-owned supermarkets or from trips abroad. Reservations are taken on Ms Nicolas’s mobile phone. Advertising is banned, though classified ads in the phone book will soon be allowed.

Across Cuba small businesses are proliferating. Most are on a more modest scale than La Galeria. Fernando and Orlandis Suri, who are smallholders at El Cacahual, a hamlet south of Havana, can now legally sell their fat pineapples and papaya from a roadside stall, along with other produce. Orlandis plans to rent space on Havana’s seafront to sell fruit cocktails and juice. In Santa Clara, Mr Pérez’s wife, Yolanda, sells ice-cream from their home. Having paid 200 pesos for a licence and 87 pesos in social-security contributions, she earns enough “to buy salad”. The streets around Havana’s Parque Central heave with vendors hawking snacks and tourist trinkets. Many of them are teachers, accountants and doctors who have left their jobs for a more lucrative, if precarious, life in the private sector.

No reason to work

This cuentapropismo is only the most visible part of Raúl Castro’s reform plan. “The fundamental issue in Cuba is production,” says Omar Everleny, a reformist economist. “Prices are high and wages are low because we don’t produce enough.”

Cuban statistics are incomplete, inconsistent and often questionable. But in a lifetime’s detective work, Carmelo Mesa Lago at the University of Pittsburgh has calculated that output per head of 15 out of 22 main agricultural and industrial products was dramatically lower in 2007 than it had been in 1958. The biggest growth has come in oil and gas and in nickel mining, largely thanks to investment since the 1990s by Sherritt, a Canadian firm. But output per head of sugar, an iconic Cuban product, has dropped to an eighth of its level in 1958 and 1989. Capital investment has collapsed. Raúl Castro has repeatedly lamented that Cuba imported around 80% of the food it consumed between 2007 and 2009, at a cost of over $1.7 billion a year.

The American embargo is an irritant, but the economy’s central failing is that Fidel’s paternalist state did away with any incentive to work, or any sanction for not doing so. So most Cubans do not work very hard at their official jobs. People stand around chatting or conduct long telephone conversations with their mothers. They also routinely pilfer supplies from their workplace: that is what keeps the informal economy going.

The global financial crisis in 2007-08 also took its toll. Tourists stayed away, the oil price plunged, and with it Venezuelan aid. Hurricane damage meant more food imports, just when world food prices were rising and those of nickel, now Cuba’s main export, were plunging. All this coincided with the political infighting in which Mr Lage was ousted, during which “all financial and budgetary discipline was blown away”, according to a foreign businessman. Having repeatedly defaulted on its foreign debt, Cuba has little access to credit. Instead of devaluing the CUC, which would have pushed up inflation, in January 2009 the government seized about $1 billion in hard-currency balances held by state-owned enterprises (SOEs) and foreign joint ventures. It did not finish paying them back until December 2011.

The guidelines approved by the party congress contain measures to raise production and exports, cut import demand and make the state financially sustainable. This involves, first, turning over idle state land to private farmers; second, making the state more productive by transferring surplus workers to the private sector or to co-ops; and third, lifting some of the many prohibitions that restrict Cuban lives, and granting much more autonomy to the 3,700 SOEs.

The grip of the state on Cuban farming has been disastrous. State farms of various kinds hold 75% of Cuba’s 6.7m hectares of agricultural land. In 2007 some 45% of this was lying idle, much of it overrun by marabú, a tenacious weed. Cuba is the only country in Latin America where killing a cow is a crime (and eating beef a rare luxury). That has not stopped the cattle herd declining from 7m in 1967 to 4m in 2011.

In 2008 Raúl allowed private farmers and co-ops to lease idle state land for ten years. By December last year 1.4m hectares had been handed out. The government has now agreed to extend the lease-period to up to 25 years, allow farm buildings to be put up and pay for any improvements if the leases are not renewed.

Credit and technical assistance also remain scarce, says Armando Nova of CEEC. Farmers suffer in the grip of Acopio, the state marketing organisation. It is the monopoly supplier of inputs such as seeds, fertiliser and equipment and was the sole purchaser of the farms’ output, but its monopoly is being dented. Farmers can now sell surplus production of all but 17 basic crops themselves. Under a pilot programme in Artemisa and Mayabeque provinces, near Havana, new co-ops will take over many of Acopio’s functions.

The reformers want to see Acopio go. More surprisingly, so does Joaquín Infante Ugarte at the National Association of Economists and Accountants (ANEC): “It’s always been a disaster. We should put a bomb under it.” But in around 100 of Cuba’s 168 municipalities the economy is based on farming, so Acopio is a big source of power and perks for party hacks, and its future is the subject of an intense political battle. That makes farmers nervous. A year ago the 30 or so farmers in the Antonio Maceo co-op in Mayabeque leased extra land, got a loan and planted bananas, citrus and beans. The administrator says output is up, but “it will take time to see a real difference.” And with that he clammed up.

Official data suggest that output of many crops fell last year; the price of food rose by 20%. That may be partly because farmers are bypassing the official channels. Granma, the official—and only—daily newspaper, reported in January that a spontaneous, self-organised and regulated wholesale market in farm products has sprung up in Havana. That looks like the future.

Letting go is hard to do

Reducing the state’s share of the economy has been even more contested. Raúl originally said the government would lay off 500,000 workers by March 2011 and a total of 1.1m by 2014. That timetable has slipped by several years because the government has been reluctant to allow sufficiently attractive alternatives for workers to give up the security (and the pilfering opportunities) of a state job. But including voluntary lay-offs and plans to turn many state service jobs into co-ops (as has already happened with small barber’s shops, beauty parlours and a few taxi drivers), some 35-40% of the workforce of 4.1m should end up in the private sector by 2015, reckons Mr Everleny.

Raúl sees corruption as politically incendiary at a time of rising inequality

By October 2011, he says, some 338,000 people had requested a business licence, 60% of whom were not leaving state jobs, suggesting that they were simply legalising a previous informal activity. As happens to small businesses the world over, many fail in the first year. Few of the cuentapropistas have Ms Nicolas’s business experience. Many clearly find it hard to distinguish revenue from profit. ANEC is organising training courses. But the government has stalled an attempt by the Catholic church to set up an embryonic business school.

If cuentapropismo is not to be a recipe for poverty, the government will have to ease the rules. Mr Everleny wants to see private professional-service firms being established: architects, engineers, even doctors. Already the taxes levied on the new businesses have been cut, but they are still designed to produce “bonsai companies”, in the words of Oscar Espinosa Chepe, a dissident economist.

Lack of credit is another obstacle. Start-up capital for new businesses comes mainly from remittances. In a pilot scheme the government approved $3.6m in credits in January, nearly all for house improvements. As for deregulation, Raúl has taken some simple and popular steps, lifting bans on Cubans using tourist hotels and owning mobile phones and computers, and last year allowing them to buy and sell houses and cars.

But reforming SOEs is far more complicated. They have been told to introduce performance-related pay. The boldest step was last year’s abolition of the sugar ministry. In principle, SOEs that lose money will be merged or turned over to their workers as co-ops. But a planned bankruptcy law is still pending. So is the elimination of subsidies and the introduction of market pricing. Mr Ugarte of ANEC thinks much of this will happen this year, along with a new law to introduce corporate income tax.

The pace of change has picked up since the party congress set up a commission with 90 staff under Marino Murillo, a Politburo member and former economy minister, to push through the reforms, says Jorge Mario Sánchez at CEEC. “By 2015 there won’t be the socialist economy of the 1990s, nor the same society.” But there are several gaps.

For one, the government seems undecided what to do about foreign investment, a key element in the rapid growth in Vietnam and China. It has cancelled some of the joint ventures it had signed (often in haste) during the Special Period, and such new agreements as it is entering are almost exclusively with companies from Venezuela, China and Brazil. Odebrecht, a Brazilian conglomerate, has reached an agreement under which it will run a large sugar mill in Cienfuegos for ten years. Many foreign companies are keen to invest in Cuba but are put off by the government’s insistence on keeping a majority stake and its history of arbitrary policy change.

Officials worry that foreign investment brings corruption. Raúl has launched an anti-corruption drive with the creation of a powerful new auditor-general’s office. Several hundred Cuban officials, some very senior, have been jailed, as have three foreigners. Raúl rightly sees corruption as politically incendiary at a time of rising inequality. But he is tackling the symptoms rather than the cause. “People who were making $20 a month were negotiating contracts worth $10m,” says a foreign diplomat.

The guidelines involve only microeconomic reforms. Raúl’s macroeconomic recipe has so far been limited to austerity: he has managed to trim the fiscal and current-account deficits. The trickiest reform of all will be unifying the two currencies, by devaluing the CUC and revaluing the peso. It would help if Cuba were a member of the IMF and the World Bank and had access to international credit, but so far the government has shown no interest in joining. Mr Vidal of CEEC points out that for devaluation to provide a stimulus, rather than just generating inflation, the economy would have to be far more flexible. That will require a political battle.

 

Posted in Blog | Tagged , , , , , , , , , , , , | Leave a comment