Russia Sends Cuba Oil Lifeline, Filling the Gap as Venezuela Collapses

Russia has recently sent Cuba an energy lifeline, but the terms of the deal are shrouded in secrecy (
Russia has recently sent Cuba 250,000 tons of petroleum products, but the terms of the deal are shrouded in secrecy (SeaNews).

News of a Russian contract to supply Cuba with large quantities of diesel and petroleum has exacerbated an already strained relationship between the two nations and the United States. The Soviet Union, the Caribbean island’s longtime benefactor, once propped up the island’s economy, supplying the vast majority of its energy needs, and buying its sugar at considerably inflated prices. It is generally suspected that cash-strapped Cuba will be receiving the oil at discounted prices, or in conjunction with an offer of Venezuelan drilling rights to Russian oil giant Rosneft.

Following the 1991 disintegration of the Soviet Union, geopolitical influence in Latin America ceased to be a priority for the new Russian government. However, under the tenure of Vladimir Putin, Russia has sought to increase its geopolitical influence in the region, pursuing closer relations with a bloc of left-wing nations including Cuba, Venezuela, Nicaragua, and Bolivia, that are often at odds with the United States.

Terms of the deal have not been made official. However, University of Texas oil expert Jorge Pinon estimates that the deal would be valued at USD $105 million, and amount to around 1.8 million barrels of petroleum products.

Cuba once relied on the generosity of Venezuelan strongman Hugo Chavez, who showered the Communist island nation with subsidized oil, often in exchange for Cuban doctors. Chavez adeptly parlayed his nation’s vast oil riches into significant geopolitical influence in the world in general, and throughout Latin America in particular, even providing some low income American consumers with cheap heating oil during winter months.

In the wake of his 2014 death, and the nation’s economic collapse presided over by successor Nicolas Maduro, Venezuela’s geopolitical influence is on the decline. As Venezuela’s political and economic situation has become increasingly dire, the nation is no longer able to spread its largesse around the region, and remains diplomatically and geopolitically isolated, with only traditional ideological allies Cuba, Nicaragua, and Bolivia in its corner.

The recent oil deal was inked by Russian oil giant Rosneft, which agreed to ship the massive petroleum delivery via tanker to Cuban firm Cubametals. The terms of the deal remain secret, which helps to obfuscate Putin’s intentions. Cuba, which is generally considered a high credit risk, is often required to pay cash up front for oil shipments. Since the purchase price was not made public, it is difficult to speculate as to whether Putin is merely selling the oil at market price, or offering the oil and diesel at subsidized prices in order to boost geopolitical influence in the region.

The secrecy shrouding the terms of the deal raises suspicions. If Russia is subsidizing the oil, it is likely that Putin is less than eager for the long-suffering Russian public to be informed as such. The once high-flying Russian economy has come under great strain lately as its massive commodities sectors, such as oil, mining, and agriculture, have contracted in the wake of falling global market prices. Russia’s largely state-controlled media is likely to be aiding and abetting Putin in obscuring the geopolitical aid, which would likely ruffle domestic feathers with the Russian working and middle classes, who have endured appreciable declines in their standard of living.

Venezuela signed an October 2000 agreement with Cuba to provide discounted oil, but it is clear that Venezuela’s rampant political instability has prompted the island Communist regime under Raul Castro to diversify its supply chain. The Venezuelan opposition, which won a large majority in last year’s National Assembly elections, has long called into question Chavez and Maduro’s longstanding oil-funded geopolitical diplomacy, suggesting that it came at the expense of the Venezuelan people. Chavez and his United Venezuelan Socialist Party are widely regarded by economists to have squandered the nation’s considerable oil wealth, buying regional loyalty to the neglect or pressing domestic concerns.

If Maduro is forced from power, the opposition is certain to revisit and significantly curtail the regime’s longstanding subsidized oil shipments around the region.

Donald Trump has recently talked tough on both regimes; breaking with Putin by launching air strikes in Syria, and repeatedly criticizing Castro’s authoritarian regime and Obama’s renewal of diplomatic and economic relations, claiming that the previous administration made a bad deal, giving away too much, while expecting too little in return, particularly with regard to economic and political freedoms for the Cuban people.

From 2005 to 2010, Russia only shipped an estimated USD $11.3 million in petroleum products to Cuba. Thus, Putin’s massive geopolitical play appears to hearken back to the Cold War era, when the Soviet Union was the island’s nearly exclusive benefactor. It appears that Raul Castro is strategizing to replace cash-strapped Venezuela with its traditional sponsor and ideological ally of yesteryear.

Sources: El Mundo, CNBC

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