Cuba Diversifies Its Risk

5 Nov

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Source: Cuba Diversifies Its Risk

 

By William M. LeoGrande

October 6, 2016

Via Resumen Latinoamericano

Recent visits to Cuba by a bevy of European and Asian leaders highlight a key element of Raul Castro’s foreign policy that has he pursued alongside normalization with the United States: Don’t put all of Cuba’s eggs in one international basket.

Cuba learned this lesson the hard way. Pre-revolutionary dependence on the United States, followed by post-revolutionary dependence on the Soviet Union, twice plunged Cuba into economic crisis when those ties were severed. Although less drastic, the current austerity triggered by the decline in oil shipments from Venezuela underscores the danger of relying on a single foreign partner.

Cuba’s leaders hope that better relations with Washington will lead to beneficial commercial ties, but they are still working hard—and successfully—to diversify the island’s international economic relations so Cuba will never again be at the mercy of a single partner, especially not the U.S.

The risk is real. The leading edge of a tsunami of American visitors is already crashing on Cuban shores. The number last year jumped 77 percent from 2014; this year it is on track to be 30 percent more than in 2015. Hundreds of business proposals from U.S. firms are flooding the Cuban bureaucracy.

As a counterweight to the anticipated surge in U.S. trade and investment, Cuba has been cultivating partners farther afield, upgrading relations with old allies Russia and China, and normalizing relations with traditional U.S. allies in Western Europe and Asia.

Both Russia and China are seeking to extend their influence in Latin America—China as part of the global assertiveness that comes with being an economic superpower, Russia as part of President Vladimir Putin’s desire to restore Moscow’s diminished global reach and reputation.

Russia’s resurgence in the Caribbean traces back to Putin’s 2000 trip to Cuba, which resulted in expanded trade deals, followed by Castro’s 2009 visit to Moscow , the first by a Castro since the end of the Cold War. Prime Minister Dmitry Medvedev traveled to Cuba in February 2013, signing a number of agreements on trade and scientific cooperation. In July 2014, Putin visited the island and agreed to forgive 90 percent of Cuba’s $32 billion in Soviet-era debt, with the remainder to be retired through debt-equity swaps linked to Russian investments. By the time Castro traveled to Moscow again in 2015, Russia had signed agreements to invest in airport construction, development in the port of Mariel, metallurgy and oil exploration. It also agreed to lend Cuba more than $1.3 billion to develop thermal energy plants.

The linkages extend beyond commerce. Both sides refer to their revived relationship as a “ strategic partnership ” that has diplomatic and military components. Diplomatically, Cuba supports the Russian positions on Ukraine, Syria and NATO expansion. Militarily, Russia is refurbishing and replacing Cuba’s aging Soviet-era arms. Russian naval vessels visit Cuban ports, the most prominent being the ostentatious arrival of a large Russian surveillance vessel the day before Secretary of States John Kerry celebrated the reopening of the U.S. embassy in Havana in August 2015. It was a signal that Cuba’s new friends should not expect to usurp the place of old ones.

China’s economic ties with Cuba date to the 1990s, when Beijing provided Cuba’s reeling economy with several hundred million dollars’ worth of loans to buy consumer goods. In 2004, Chinese President Hu Jintao visited Havana and signed 16 agreements establishing joint ventures to manufacture many of those goods in Cuba. In 2008, Hu offered additional loans and agreed to invest $6 billion in Cuba’s oil and gas industry. China has also become a major partner in the development of Cuba’s transportation infrastructure, supplying cars, buses and trains, and building rails and roads.

In 2011, Chinese Vice President Xi Jinping visited Havana, signing 13 new economic accords for cooperation in biotechnology, telecommunications, agriculture, oil and gas. In 2012, on trips to China and Vietnam, Castro underscored the importance of learning from their experience transforming stagnant, centrally planned economies into socialist market economies—a transformation he has begun in Cuba.

The pace of cooperation between Havana and Beijing accelerated after Castro and President Barack Obama announced the normalization of U.S.-Cuba relations in December 2014. Xi returned to Cuba as president in 2015, signing 29 new agreements, followed by Premier Li Keqiang just last month, who agreed to cancel Cuba’s $4 billion outstanding debt. Last year, China was Cuba’s second-largest trading partner behind Venezuela, with total trade worth $1.6 billion.

Obama’s decision to normalize relations implicitly gave traditional U.S. allies permission to deepen their own ties with Cuba without fear of angering Washington. While U.S. businesses struggle to disentangle themselves from the embargo, foreign companies are moving quickly to expand commercial ties before their American competitors can get a foot on the ground.

Last month, Shinzo Abe became the first Japanese Prime Minister to visit Cuba with the avowed purpose of promoting Japanese business. Abe’s discussions with Castro focused on expanding trade and investment in medicine, infrastructure, energy and communications, and came just days after Japan agreed to write-off two-thirds of Cuba’s $1.75 billion debt.

Cleaning up the financial wreckage left by Cuba’s 1986 default on its long-term debt has been a priority for Castro and a necessary condition for reintegrating Cuba into the global economy. Last December marked a milestone when Cuba signed an agreement with 15 creditor nations in the Paris Club to write-off $8.5 billion of its $11.1 billion outstanding debt and restructure the remainder to be paid off over the next 18 years. The exceptionally favorable terms signaled that the Paris Club countries see more to be gained from cultivating future business with Cuba than from trying to recoup past losses.

The European Union has also been moving toward a political and economic cooperation agreement with Havana to replace the 1996 Common Position that conditioned relations on Cuban human rights practices. Negotiations began in early 2014, before the change in U.S. policy, and have accelerated since. They reached an agreement in early March 2016, just days before Obama landed in Havana, which is awaiting ratification in the European Council. When approved, it will expand the scope of political dialogue and economic cooperation between Cuba and the EU’s member states.

Even as Cuban officials welcome dozens of American trade missions, they are building a robust and diverse network of international ties to hedge—so that if normalization succeeds, Cuba will not be drawn back into a dependent relationship with the Colossus of the North. And if normalization fails, Cuba will have no shortage of alternative partners.

http://www.worldpoliticsreview.com/articles/20145/cuba-reaches-out-to-partners-far-and-wide-to-hedge-against-u-s-engagement

Source: World Politics Review

 

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