U.S. companies can help Cuba achieve the economic independence needed in order to consider a political and economic evolution.
BY JORGE PIÑON
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 Cuban government in maintaining a politically antagonistic and belligerent position toward the United States.
Cuba has learned from past 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 in 1991 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 United States Geological Survey to be at 5.5 billion barrels of oil and 9.8 trillion cubic feet of natural gas undiscovered reserves, will it have the economic independence needed in order to consider a political and economic evolution.
Although Cuban authorities have invited United States oil companies to participate in developing their offshore oil and natural gas resources U.S. law does not allow it. Today international oil companies such as Spain’s Repsol, Norway’s StatoilHydro and Brazil’s Petrobras are active in exploration activities in Cuba’s Gulf of Mexico waters.
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 our almost five-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 natural gas.
The Secretary of Treasury has the authority to rescind, modify or change the embargo regulations because the Helms Burton codified the embargo regulations -- including the provision that the Secretary "may authorize any prohibited activity." President Clinton modified the regulations by permitting 12 categories of travel and remittances, and President Bush modified the embargo by rescinding some of these regulations that were codified in the 2000 Agricultural and Food sales legislations to Cuba.
In the opinion of legal experts consulted ...no legislation prevents the President from authorizing U.S. oil companies from developing Cuban oil and natural gas reserves.
A Cuban government influenced by its energy benefactors would most likely result in a continuation of the current political and economic model. If Cuba’s future leaders are unable to fill the power vacuum left by the departure of the old cadre, they could become pawns of illicit business activities, drug cartels, and the United States could face a mass illegal immigration by hundred of thousand of Cubans. (...)
Allowing Cuba to develop its undiscovered hydrocarbon reserves would serve to the continuation of present policies on the island by the current leadership. (...)
If Cuba’s undiscovered reserves are proven, it would take between three to five years for their development, and production volumes would have to reach a level of over 200,000 barrels per day to have the same economic benefit as that derived today from Venezuela’s oil subsidies.
The Brookings Institute report Cuba: A New Policy of Critical and Constructive Engagement proposes ..., as part of phased strategy, a policy that supports the emergence of a Cuban state where the Cuban people determine the political and economic future of their country through democratic means, and to achieve this goal Cuba must achieve energy independence.
In conclusion, ....if U.S. companies were allowed to contribute in developing Cuba’s hydrocarbon reserves, as well as renewable energy such as solar, wind and sugarcane ethanol, it would reduce the influence of autocratic and corrupt governments on the island’s road toward self determination.
Most importantly, it would provide the United States 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.
Jorge Piñón, a former president of Amoco's Latin American operations, is an energy fellow at the University of Miami's Center for Hemispheric Policy and a member of the Brookings Institution's Cuba Task Force. This column is based on his testimony to the United States House of Representatives Subcommittee on National Security And Foreign Affairs on April 29, 2009. Excerpted and republished with permission. Testimony reflects strictly the personal views of the author and not in his official capacity with the University of Miami and/or The Center for Hemispheric Policy.