Cuba set for new revolution but US thaw could be a long way off


Irish Times: OPINION: Shedding public sector jobs, bolstering domestic enterprise while seeking foreign investment – does this sound familiar? Welcome to Cuba . . .

CUBANS HAVE entered a period of dramatic change with enormous implications for economic, political and social aspects of their lives, perhaps not seen since the collapse of Cuba’s old sponsor, the USSR.

With that cataclysmic break-up in the early 1990s, some 85 per cent of the Caribbean island’s income vanished, marking the start of a period of extreme hardship remembered bitterly as the Periodo Especial .

Not least among the changes now deemed necessary to deal with the country’s troubled economy by President Raul Castro is the laying off of 500,000 state employees between this month and the end of March. Effectively, this ends Cuba’s official policy of full state employment, with some commentators saying these changes could even mark the beginning of the end of the 50-year socialist economic experiment for the country’s 12 million people.

The demise of communism and the Castro brothers, Raul and Fidel, however, have been predicted many times before – indeed their deaths were once reported in a US newspaper by an Irish-American journalist in 1956 shortly after they had landed in Cuba from Mexico with a small group to begin the final phase of the revolution.

Despite the scale and scope of the proposed changes, however, President Castro is anxious to insist that the essential nature of the last communist state in the western hemisphere will not itself change. A recent 32-page document outlining proposed changes, Draft Guidelines for Economic and Social Policy , emphasised that “as we update our economic model, planning will be paramount, not the market”.

Preparing people for such seismic changes, Castro had said that Cuba would “fall off a cliff” if it did not make savings through efficiencies and “update” the tightly-controlled command economy. He said the economy was the first order of business for all the political leaders.

The measures are intended not only to correct the economy but to deliver improvements in living standards that ordinary Cubans have long and patiently desired. Most prominent of the changes are the dramatic shrinking of state employment; a significant expansion of the private sector; the encouragement of greater foreign investment in designated economic zones (not dissimilar to Vietnam and China, it appears); and a partial opening up of the property market, in which you may buy and sell property, but not accumul-ate.

On a recent visit to China, Cuban parliament speaker Ricardo Alarcon said: “Cuba is prepared to take advantage of China’s experience of development in reform and opening.”

China, now a major trading partner, recently signed a $6 billion (€4.53 billion) deal to upgrade an oil refinery and build a gas refinery in the southeastern city of Cienfuegos. This will process huge finds in the Cuban section of the Gulf of Mexico expected to come online this year.

More than 30,000 Cubans have already received licences to work privately as restaurateurs, mechanics, hairdressers and street vendors, for example, and for the first time such individuals may be allowed to take on employees and must pay taxes. As many as 250,000 licences may be issued eventually. Brazil, Latin America’s emerging economic superpower, has offered to share with Cuba its expertise in private enterprise.

Ordinary Cubans fear that if there is no match between jobs created in the private sector and the lay-offs, there will be a negative impact on the country’s social cohesion that full employment has delivered over the past half century. For example, it is feared that street crime, which is negligible by international standards, will rise.

Furthermore, Cubans express various degrees of anxiety as to whether they might be among the half million selected for efficiencies in the notoriously sluggish and bureaucratic state sector.

Alarm bells will also be ringing in Washington because of the potential for another mass wave of immigrants from Cuba.

Significantly, a long-awaited Communist Party Congress – the party forum which defines major policy issues and announces changes, but has not met since 1997 – has now been called for the end of April. At this meeting the proposals in the draft document and measures already taken will be discussed, and the shape of the new political order in Cuba will become clearer.

Cuba’s change in course is further hard evidence of Raul Castro’s shift away from the doctrinaire communism of his elder brother Fidel towards a more pragmatic, efficiency-socialism model. This approach was also evident recently with the state’s agreement with the Cuban Catholic Church and Spain to release more than 50 political prisoners, and with the opening of a Catholic seminary outside Havana, the first since the revolution.

All of this would suggest that now would be a fruitful time for the US to engage with Cuba, as indeed President Barak Obama promised in the early days of his presidency, which President Castro said he would respond to “measure for measure”.

However, the US economic downturn and mid-term elections have since changed the situation and the Republican Party’s control of the House of Representatives has given it sway over the powerful Foreign Relations Committee. From January, this committee will be chaired by Cuban-born, far-right Florida Congresswoman Ileana Ros-Lehtinen, best known for her visceral hostility towards the Cuban regime and other left-leaning administrations in Latin America.

In a 2006 Channel 4 documentary on the numerous attempts to kill the then Cuban leader, she was happy to announce: “I welcome the opportunity of having anyone assassinate Fidel Castro.”

So despite Cuba signalling an historic change in the state’s relationship with private enterprise, bar unforeseen circumstances it seems any likelihood of the US engaging with the new situation is likely to founder on the jagged rocks of old southern Florida émigré politics.

www.particularcuba.com

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Key political risks to watch in Cuba


HAVANA, Dec 2 (Reuters) – The success or failure of Cuba’s economic reforms will be the key issue to watch in the next year as the government moves to strengthen the economy and ensure survival of the island’s communist system once the current aging leadership is gone.

The cash-strapped government is looking for ways to cut spending while increasing income, and could get long-term help if offshore oil exploration slated to begin in 2011 is successful.

All this occurs against a backdrop of only slightly tempered hostility with the United States, including an ongoing dispute over a U.S. contractor held by the Cubans on suspicion of spying.

ECONOMIC CHANGES

President Raul Castro has taken aim at Cuba’s chronic economic problems with plans to slash 500,000 jobs from state payrolls by March while expanding the private sector and encouraging less reliance on the state.

About 200,000 of those jobs are expected to shift over to employee-run cooperatives that will be created at businesses currently operated by the state. The government also has begun issuing 250,000 new licenses for self employment and for the first time, the self-employed will be able to hire workers. So far, 30,000 licenses have been granted.

Self employment was first allowed in communist Cuba during the economic crisis that followed the collapse of the Soviet Union, the island’s main ally, in 1991. There were 143,000 licensed self-employed in 2009, and many more illegal ones.

The government’s bet is that it can create enough jobs quickly enough to absorb the laid-off government workers, most of whom it says were not in productive positions. After the first 500,000 jobs are cut, it plans to slash another 500,000 in the next few years, likely leading to more private sector expansion.

Castro announced the ruling Communist Party would hold in April its first Congress since 1997 to ratify the changes, many of which are already in action. Before the Congress, Cubans are to provide input at forums across Cuba.

The reforms are the biggest since Raul Castro succeeded brother Fidel Castro as president in 2008, and come with many questions.

Among them are whether the cumbersome government bureaucracy can move quickly to implement the plan and whether the new entrepreneurs will be too handicapped by regulations, taxes and lack of credit to succeed.

Also, do the planned job cuts present the danger of many people ending up without work and if so, what will the consequences be in a socialist country where people basically have been guaranteed employment for decades?

But the key question is whether the reforms will accomplish what Castro wants — more productivity, a stronger economy and, ultimately, the survival of communism, installed after his brother took power in a 1959 revolution. He has said maintaining the system is key to protecting national sovereignty.

Other reforms have been made, particularly in agriculture, with the same goal in mind. Castro, trying to increase output and reduce dependence on budget-draining food imports, has leased fallow lands to private farmers and taken other steps, but food production was down 7.5 percent in the first half of this year, as farmers complain that they are still too stifled by the state.

What to watch:

— How quickly the government moves to implement reforms.

— The numbers and performance of the newly self employed.

— The effects of government layoffs.

— Agricultural production.

CASH SQUEEZE, SOURCES OF REVENUE

Cuba, hit hard by hurricanes in 2008 and by the global financial crisis, has been so short of hard currency that it stopped paying most of its bills and froze Cuban bank accounts of many foreign businesses two years ago. The situation has eased, but is not yet resolved.

To avoid future cash shortages, Castro has cut spending and sought more income for the state, which controls 85 percent of Cuba’s economy. He has slashed imports by 30 percent.

Cuba is hoping to collect taxes from the newly self-employed and boost revenues from old standbys like nickel exports and tourism, two of its top hard currency earners.

The government has said it will allow construction of golf course developments, with the goal of attracting wealthier tourists.  The courses will be a small piece of the tourist industry in Cuba, but, given golf’s image as the leisure sport of the rich, a larger symbol of how far Cuba is prepared to go to improve its economy.

The government also hopes to one day get more American tourists, should the U.S. ease or eliminate the ban on most travel to Cuba under its 48-year-old trade embargo against the island. Republican gains in the U.S. Congress in the Nov. 2 mid-term congressional elections make changes less likely.

In a potentially game-changing development, a consortium led by Spanish oil firm Repsol YPF is expected to drill an exploratory well in Cuba’s part of the Gulf of Mexico in 2011. It previously drilled an offshore well in 2004, but said it did not find oil in commercially viable quantities.

The drilling rig to be used, which has been under construction in China, will be passed on to other companies such as Malaysia’s state-owned Petronas and a unit of India’s ONGC  to explore in blocks they have leased in Cuban waters.

The U.S. Geological Survey has estimated Cuba has about 5 billion barrels of oil offshore, but Cuba says it may have 20 billion barrels. Cuba currently depends on imports from its oil-rich socialist ally Venezuela.

Russia’s state oil company Zarubezhneft has said it plans to begin exploration next year in two blocks adjacent to Cuba’s coast.  A unit of China National Petroleum Corp. is set to begin a $6 billion upgrade of Cuba’s Cienfuegos refinery, with financing mostly by China’s Eximbank, backed by Venezuelan oil.

What to watch:

— Possible U.S. moves to ease its ban on travel to Cuba.

— Movement of nickel prices, start of golf course projects.

— Repsol’s second deep water exploratory well in Cuba.

— China’s growing presence in Cuba energy sector

U.S.-CUBA RELATIONS

Cuba’s relations with the United States have dominated events on the island for more than a century. During the last five decades of open hostility, the United States has tried to unseat the Castro brothers through subversion, assassination, coercion and a half-baked invasion. The long-standing trade embargo meant to topple the Castros through economic strangulation remains in place despite its lack of success. Cuba has used it to gain international support by casting itself as David versus an overweening Goliath, and at home as a scapegoat for its economic problems.

Despite modest changes at the beginning U.S. President Barack Obama’s administration, U.S.-Cuba relations have thawed only slightly and near-term prospects for improvement look dim due to Cuba’s detention of U.S. aid contractor Alan Gross.

Gross has been held since Dec. 3, 2009 on suspicion of espionage and providing illegal satellite communications equipment to government opponents, but has not yet been officially charged with a crime. The United States says he was only helping Jewish groups set up Internet access, but Cuba is suspicious because he was working for a U.S. federally-funded program seeking to promote political change on the island.

The U.S. government says it will take no major initiatives to improve relations with Cuba as long as Gross is held. Cuba may want to hold him until it gets something in exchange, such as the return of five Cuban agents imprisoned in the U.S. or an end to the programs like the one that sent Gross to Cuba.

The Cuban government is in the process of releasing political prisoners and sending them to Spain to resolve one of its biggest problems with the international community and to get its opponents out of the country.

While U.S. reaction has been guarded, the 27-nation European Union has instructed its foreign affairs chief to explore improved relations with Cuba.

Meanwhile, Cuba has steadily built relations with other key countries, among them China, Brazil, Russia and Spain. It has a special relationship with top trading partner Venezuela, whose President Hugo Chavez is close to Fidel Castro and agreed in November to extend economic cooperation another 10 years.

What to watch:

— Fate of Alan Gross.

— Continued release of political prisoners.

— U.S. and EU reaction to Cuban reforms.

www.particularcuba.com

Cuba deal boosts China’s Latin American oil plans


HAVANA (Reuters) – China is taking another great leap forward in its Latin American energy plans, raising Cuba’s energy importance in the process, with a deal to lead a $6 billion refinery expansion project on the communist island, experts said this week.

The project, to be funded mostly by China’s Eximbank, is the latest of several significant moves in the region for the Asian power as it continues to expand its global influence.

For Cuba, the refurbishing of its antiquated refinery in the coastal city of Cienfuegos will provide an outlet for oil it hopes to tap soon in the Gulf of Mexico, while also laying the groundwork for the island to possibly become a key oil transshipment point for the Caribbean basin.

A unit of state-owned China National Petroleum Corp expects to begin work in early 2011 on the project that will more than double the refinery’s capacity to 150,000 barrels daily and include construction of a liquefied natural gas terminal.

Venezuela, Cuba’s closest ally, will provide financial guarantees in the form of oil, a pattern followed by Beijing in other deals for energy in Latin America.

In the past two years, China has financed projects and formed joint ventures in Venezuela, Brazil and Ecuador which are expected to bring it at least 500,000 barrels of crude oil per day.

It has leased a 5 million barrel storage facility on the Caribbean island of St. Eustatius and reportedly talked with San Antonio, Texas-based refining giant Valero Energy Corp. about buying its refinery on the island of Aruba.

The oil marriage of China with Latin America is one made in energy heaven, said analyst RoseAnne Franco at energy and mining consulting firm Wood Mackenzie in Houston.

“The regions are clearly of complementary interest. China is looking for energy security while Latin America is eager for new consumer capital markets,” she said. “There is a good foundation there for the relationship.”

MODERNIZING CUBAN INFRASTRUCTURE

The Cienfuegos project is part of larger modernization of Cuba’s energy infrastructure. Brazil is financing the refurbishing and expansion of the port at Mariel, which will be the logistical platform for offshore oil operations in the Gulf of Mexico set to begin next year.

Venezuela, Cuba’s principal ally and top trading partner, is refurbishing a tanker port at Matanzas and rehabilitating a cross-country pipeline to the Cienfuegos refinery. It has also committed to constructing a 150,000 barrel per day refinery at Matanzas, which is about 60 miles east of Havana.

The expectation that Cuba will find significant offshore oil reserves is driving much of the work.

Several companies are planning to sink exploratory wells off Cuba’s northern coast starting next year.

The U.S. Geological Survey has estimated Cuba has about 5 billion barrels of oil and 10 trillion cubic feet of natural gas offshore, but Cuba says it could have at least 20 billion barrels of oil.

The other, larger piece of the puzzle is the expansion of the Panama Canal, which is supposed to be finished by 2014 and will allow bigger oil tankers to use the waterway linking the Pacific and Atlantic oceans.

Cuba is well positioned to serve as both a refining center and oil transshipment point for the newly expanded canal, said Jonathan Benjamin-Alvarado, a Cuban oil expert at the University of Nebraska in Omaha.

“Cuba doesn’t solve anybody’s energy issues, but it expands the opportunities of the global markets to have Cuba as another point of transshipment or hub for oil services and activities,” he said.

“There is a need for expansion and diversification of both refining and storage capacity in the region, and Cuba fits perfectly,” he said.

Should normal relations with the United States ever be restored, Cuba, just 90 miles from Florida, would be well positioned to serve the U.S. market, said Jorge Pinon, an oil expert at Florida International University in Miami.

www.particularcuba.com

Russia’s Gazprom plunges into Cuba’s offshore oil business


Havana, Cuba (CNN) — Russian energy firm Gazprom has joined a growing list of foreign companies searching for oil off Cuba’s coast.

www.cubaluxuryrent.com

Offshore Oil platform

Gazprom Neft, the oil arm of Gazprom, announced in a news release that it had bought a 30 percent stake in four offshore oil exploration blocks from Malaysia’s state-owned oil company Petronas. No financial details were provided.

The Cuban government says it has up to 20 billion barrels of oil in its portion of the oil-rich Gulf of Mexico, but the U.S. Geological Survey has estimated a smaller 4.6 billion barrels.

Cuba has divided its share of the Gulf into 59 blocks and foreign oil companies have leased 21 of them.

In the wake of this year’s BP Gulf oil spill, some in Florida are worried about Cuba drilling so close to home. Some of the blocs are about 50 miles off the coast of Key West.

Petronas leased its four blocks in 2007. Under the agreement, the lease can be extended through 2037 if oil is found and until 2042 if gas is found.

According to analysts and oil experts who have visited Cuba, the country aims to drill seven exploration wells by 2014.

Cuba currently produces about 60,000 barrels of oil per day from onshore wells. It imports another 115,000 bpd from Venezuela on favorable terms.

www.cubaluxuryrent.com

U.S. Denies Cuba’s Access to Oil Technologies


According to ACN: The process of drilling and extracting oil in Cuba is seriously affected by the United States economic, financial and commercial blockade which prevents Cuba from having access to the most advanced technologies in this field. Machinery, equipment or products with high percentage of components madeby U.S. companies or their subsidiaries can not be sold to Cuba, hence theneed to purchase them in farther markets which increases costs. General Director of the Oil Drilling and Extraction of the West Enterprise (EPEPO), Joel Pumariega told ACN that this unjust measure causes Cuba to disburse large amounts of money on the purchase of a product for the separation of water from crude oil.

Cuba used to buy that product from a Canadian company, but this one was bought by a US enterprise and therefore the sales were stopped. Its use in the industry is critical and influences the cost per ton of oil, he said. For Cuban facilities to obtain a similar product must buy it from distant markets, with the consequent delay in time, since this product is only bought when need it and in the exact amounts, he explained. Cuba is then forced to buy these equipments in third countries, where banks include the Cuba Risk factor in the loans, resulting in an increase. Next October 26 Cuba will introduce a resolution at the United Nations demanding the immediate end of the US economic war against it that has already cost it some 750 billion dollars in almost half a century.

www.particularcuba.com

Cuba to add new docks, terminal at Cienfuegos port


HAVANA – Cuba will build three additional loading docks and a terminal large enough to accommodate modern supertankers by 2014 at its port in Cienfuegos, part of the communist government’s effort with Venezuela to rehabilitate and modernize the area’s oil refinery.

Venezuelan President Hugo Chavez, a self-described socialist and close friend of Fidel Castro, attended the December 2007 re-inauguration of the Soviet-era facility on central Cuba’s southern coast, and since then it has refined 55 million barrels.

Cuba and Venezuelan plan to expand capacity there to 150,000 barrels refined per day and the new berths and terminal will ensure tankers carrying more oil can come and go more freely, said Luis Medina, director of Cuba’s national port authority, at a news conference Friday in Havana, 185 miles (300 kilometers) northwest of Cienfuegos.

Chavez’s government ships more than 100,000 barrels of oil a day to Cuba in exchange for island doctors who provide free medical care in his country and other social services. The expanded capacity at Cienfuegos will allow Venezuela to ship more petroleum products that can be refined on the island.

Cuba independently operates its largest oil field, the Varadero field discovered by Russian scientists in 1971, but the communist government relies on energy companies from Canada, Spain, Norway, India, Malaysia and China for other drilling operations.

The government has laid out zones in the Gulf of Mexico where private energy companies, mostly from Canada and Europe, have said they could one day drill deep-water test wells searching for crude.

A 2004 test well by a Spanish company was not considered commercially viable, however, and Washington’s 48-year-old trade embargo prohibits U.S. companies from investing in Cuban oil exploration and production, even though the island’s Gulf waters are close to the Florida coast.

A meeting of U.S., Mexican and Cuban scientists wrapped up Wednesday in Sarasota, Florida, with an outline for a plan to better protect the Gulf of Mexico and western Caribbean through collaborative management and conservation.

It includes actions that scientists in each country will undertake to conserve coral reefs, marine mammals, sea turtles and shark and other fish populations. Examples include a regional monitoring protocol for sea turtles to make sure results are compatible among nations and continued research expeditions focused on sharks.

www.particularcuba.com

The Times Channels the Oil Lobby on Cuba


CJR.org:

The top story in The New York Times yesterday carried a bit of water for the oil and gas lobby.

It’s about how Cuba is thinking about opening up its waters for oil drilling and how that could affect the U.S. if there were a spill. That’s a legit story, although it’s an old one. The Wall Street Journal wrote it three months ago and even then thought it worthy of just A5.

The Journal back then reported that “U.S. companies won’t participate because of a longstanding trade embargo against Cuba.” But Big Oil smells Havana crude. And that’s the twist on the Times’ story.

The paper somewhat credulously channels oil interests in reporting why U.S. drillers are worried about Cuban drilling:

The prospect of an accident is emboldening American drilling companies, backed by some critics of the embargo, to seek permission from the United States government to participate in Cuba’s nascent industry, even if only to protect against an accident.

“This isn’t about ideology. It’s about oil spills,” said Lee Hunt, president of the International Association of Drilling Contractors, a trade group that is trying to broaden bilateral contacts to promote drilling safety. “Political attitudes have to change in order to protect the gulf.”

Sure!

Fortunately, we do get this acknowledgment:

Any opening could provide a convenient wedge for big American oil companies that have quietly lobbied Congress for years to allow them to bid for oil and natural gas deposits in waters off Cuba. Representatives of Exxon Mobil and Valero Energy attended an energy conference on Cuba in Mexico City in 2006, where they met Cuban oil officials.

Basically its unclear why global oil corporations already going into Cuba won’t have equipment as good as the Americans say they need. The spill angle is a bit of a red herring.

A better angle for this story might have been something like: American oil and gas companies, which currently can’t start any new wells in the Gulf, are trying to scare people into letting them start new wells in the Gulf—for Cuba.

The folly of the whole Cold War-relic embargo itself is another story.