Thursday, September 08, 2016

Why Cuba's Half-Century Embargo Won't Be Lifted Overnight

Why Cuba's Half-Century Embargo Won't Be Lifted Overnight
Analysis SEPTEMBER 7, 2016 | 09:30 GMT

- Cuba is unlikely to unconditionally adjust the structure of its
government to meet U.S. requirements for lifting the embargo on the island.
- The Cuban government will try to engage the United States in talks,
promising to make incremental change in exchange for removing some or
all of the sanctions.
- If oil prices creep upward, Cuba's energy imports may put greater
pressure on its finances, potentially forcing it to seek some relief by
negotiating a quicker end to the embargo.


Whether Cuba will soon undergo an economic revolution depends more on
politics in Washington than in Havana. After all, the only thing
standing in the way of unrestricted trade between the world's largest
economy and the island nation just 145 kilometers (90 miles) south of it
is an embargo that rests on U.S. law. But after U.S. voters in November
choose a new president, and perhaps change the makeup of the Senate and
House of Representatives, the U.S. Congress could begin discussing the
embargo's end.

Lifting the long-standing sanctions against Cuba will be easier said
than done, though, especially given the lingering controversy over
Havana's thawing relations with Washington. Even if the next U.S.
president were willing to begin restoring trade ties between the two
countries, there is little to suggest that a post-embargo Cuban
government would look much different from the one in power today — a
problem that will no doubt create headaches for whoever wins the U.S.

Settling for Slower Progress

Nevertheless, the topic of lifting the 1960 trade embargo will be up for
debate during the next U.S. presidency. Cuban President Raul Castro is
scheduled to transfer power to his successor (most likely civilian
politician Miguel Diaz-Canel) in 2018. In doing so, Cuba will meet one
of the United States' preconditions for lifting the embargo: having an
administration without a Castro in it.

But even with Castro's departure, the structure of the Cuban government
is unlikely to change enough to comply with the Cuban Liberty and
Democratic Solidarity Act, one of the most important pieces of U.S. law
presently upholding the embargo. The law, also known as the Helms-Burton
Act, stipulates that U.S. recognition of the Cuban government would
require the disbandment of several Cuban intelligence and security
institutions, the establishment of an independent judiciary and
competitive elections. Yet it is unlikely that any Cuban administration
— even one in financial straits as dire as the Diaz-Canel government
would be — would agree to such a massive overhaul in exchange for the
embargo's end. Cuba's reluctance can largely be explained by the fact
that many of the officials in its current government rose to power under
Fidel Castro and will continue to serve after his brother is replaced in
2018. The government the Castro brothers erected during their
five-decade rule is civilian in name only and is heavily underpinned by
the political and economic backing of the Cuban armed forces.

Instead of fully complying with the Helms-Burton Act, Havana will
probably try to negotiate with Washington, vowing to make some
adjustments to its political structure in exchange for partial sanctions
relief. But such relief could be found only if Congress agreed to repeal
most — if not all — of the act in question. Until the bulk of the
embargo is lifted, any gains Cuba will see from its warming relationship
with the United States will be confined primarily to the tourism
industry, where loosened travel restrictions will allow for higher
revenues. (Cuba's tourism sector raked in some $2 billion in revenue in

Timing Is Everything

That said, Cuba may not be able to weather the embargo for much longer.
The government's coffers are draining quickly, thanks to a steady
decline in subsidized Venezuelan shipments of crude oil and refined
fuels. This year, such shipments to Cuba have dropped from an average of
100,000 barrels per day in 2012 to less than 55,000 bpd, and Havana has
had to make up the difference with funds from its own pocket and with
austerity measures aimed at reducing domestic energy consumption. So
far, low oil prices have somewhat cushioned the blow. But as oil prices
creep back up, pressure will rise on Havana to seek economic relief by
removing the embargo unless tourism revenue increases enough to close
its budgetary gap.

Politicians in both Cuba and the United States want to see the embargo
lifted during the next U.S. presidency. But whether their calls yield a
substantive discussion — let alone the vote in both houses of Congress
required to repeal the legislation holding the embargo in place — will
depend on the level of resistance seen among U.S. lawmakers. Several
U.S. politicians, including members of the Senate and House foreign
affairs committees, hold substantial sway over the debate's progress in
Congress and, by extension, over the future of Cuba's economy.

Lead Analyst: Reggie Thompson

Source: Why Cuba's Half-Century Embargo Won't Be Lifted Overnight |
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