U.S. Embargo against Cuba under Growing Siege

U.S. Embargo against Cuba under Growing Siege

With the following report on the U.S. Embargo against Cuba and matters of trade, as well as the growing unrest in congress over Bush administration policy toward Cuba, the Council on Hemispheric Affairs will be issuing a series of studies on a number of aspects of U.S.-Cuba relations. Among the themes which will be covered are Cuba and the United Nations; White House funding of a series of rightwing Cuban exile U.S. groups, as well as part of the Cuban dissident movement on the island; the matter of the transition in Cuba once the Cuban leader dies or is incapacitated; Cuban searches for petroleum; the ALBA alliance; Venezuela, Cuba, and Luis Posada Carriles; and Venezuela and the improved performance of the Cuban economy. COHA will also closely examine the recent report issued by the controversial rightwing Commission for Assistance to a Free Cuba including its recommendations on how to further pressure the Cuban economy.

• The Cuba embargo is unpopular and unprofitable for several U.S. private business sectors, and mounting pressure from the oil, agriculture and export industries is solidifying the pro-engagement front in the current debate over Cuban policy

• Through legislation currently in negotiations in Congress, U.S. industries are seeking to increase profits and gain access to Cuban markets

• The potential of Cuban oil reserves has lured major U.S. oil companies into the embargo debate to lobby for an exception, allowing them to tap this new energy source, and has garnered unlikely support for ending the embargo from pro-energy Republican legislators

• The Bush administration has doggedly intensified its anti-Castro policies, but no commission report can dissuade U.S. companies from seeking better business opportunities and expanded market potential in Cuba

Embargo: Dumb Ideology vs. Smart Profits

Washington’s embargo against Cuba has been a longstanding obstacle to U.S.-Cuban relations of any kind, but the emergence of economic opportunities in the Cuban market has prompted a possible thaw in the historic hostilities. Although ideological skirmishes over politics and trade continue between the United States and Cuba, recent legislative activity in Congress has broken with the White House’s longstanding tradition of harsh invectives and vengeful, punitive foreign policy toward the island nation. For example, recent votes in the House of Representatives on amendments intended to roll back recent restrictions on travel, trade deals and the embargo itself, reflect the growing shift in U.S. opinion concerning Cuba.

The chorus of critics demanding a reform of the embargo policy has swelled as major U.S. energy companies join the ranks, pushing the State Department and Congress for a legislative exemption to the trade embargo that would allow them to join the heated international competition for access to Cuban oil reserves. The longstanding U.S. ideology of “transformational diplomacy” has dominated as justification for the strict enforcement of the embargo, yet economic interests are gathering momentum and influencing the current intensified lobbying effort to thwart the decidedly unprofitable embargo. The U.S. International Trade Commission estimates U.S. exporters lose $1.2 billion annually as a result of their inability to access Cuban markets. The only embargo-weakening legislation to attract any significant support in Congress this year have been bills concerning the negative economic impact of the embargo on U.S. industry, a likely indication that future profits are outweighing ancient prejudices in American political culture, Congress and the Fortune 500.

Legislating Changes to the Cuba Embargo

The pro-engagement lobbying faction is seeking, through legislation in Congress, to initiate an updated Cuba policy that capitalizes on free trade and the proximity of Cuban markets. The latest battleground for the asphyxiation of the Cuba embargo is the Transportation/Treasury Appropriations Act for 2007 (H.R. 5576), which was recently passed in the House and is scheduled for mark-ups by the Senate Appropriations Committee on July 20.

Several of the proposed amendments to the Appropriations Act are efforts to turn back or repeal restrictions and regulations on trade with, or travel to, Cuba that had been expanded by the Bush administration. The Flake amendment (H.A. 1032) to loosen restrictions on religious travel to Cuba, the Moran amendment (H.A. 1049) to repeal restrictions on trade with Cuba implemented by the Treasury Department, and the Lee amendment (H.A. 1051) to expand the rules for educational travel to Cuba, met mixed fates. The Flake amendment was withdrawn due to lack of support, the Lee amendment lost in a recorded vote, and the Moran amendment passed in a voice vote. These three amendments were tacked on to the Transportation/Treasury Appropriations Act for 2007 in an effort to counter the restrictive policies of the Office of Foreign Assets Control, which grow tougher on embargo enforcement with each passing year.

The Rangel amendment (H.A. 1050), that proposed to end the embargo against Cuba altogether, was voted down, similar to previous attempts by members of Congress to legislate the embargo out of existence. But the House vote on the Rangel amendment showed a positive trend of support for ending the embargo. While the amendment to put an end to the embargo failed to pass in a House vote, support of it was 14 votes higher than an identical amendment proposed in last year’s Transportation/Treasury Funding bill. This provides evidence that opposition to the economic exclusion of Cuba from trade with the U.S. is building.

This year’s bustle of legislative activity on the issue of Cuba has been in response to toughened regulations passed by Congress and the Treasury during the Bush administration’s escalation of punitive policy measures, which followed the May 2004 release of the U.S. Commission for a Free Cuba report. In the 2006 follow-up report released by the Commission on July 11, that body’s statements brought no new surprises, only further evidence that there is no end in sight to the administration’s chronic tunnel vision on its Cuban foreign policy. Any progress on relations with Cuba will likely only come about from a shake-up in Congress, a possibility which grows more imminent as embargo opponents in key economic sectors intensify their lobbying pressure.

U.S. Agriculture Seeks to Tap the Cuban Market

The Moran amendment is the only House amendment with potential thrust to weaken the Cuba embargo, and the only one with the possibility of providing a boost to private agriculture and the U.S. commodities export sector. The amendment’s main support comes from constituents in the farming business, as food and agriculture products account for 94 percent of all exports to Cuba currently allowed by the Treasury Department regulations . The Moran amendment proposes the overturn of trade restrictions implemented by the U.S. Treasury in February 2005. These restrictions effectively stalled trade deals with Cuba by requiring that Cuban importers pay cash in advance before goods could be shipped. The Moran amendment would rectify difficulties for exporters in the U.S. by accelerating the trade transactions of U.S. industries selling food and medical commodities to Cuba, overriding the Treasury Department restrictions through an extension of the payment deadline for goods. The Treasury’s actions were fully supported by the Bush administration and have been integral to President Bush’s continued economic boycott of Cuban products.

As Representative Moran (R, KS) stated during debate in the House, “this [trade restriction] is really about a noncommercial reason, just trying to make the trade more onerous, more expensive, so that our farmers have less of an opportunity to export their goods to Cuba.” U.S. farmers have also been converted into strong opponents of the politicized anti-Castro dogma of the trade embargo. The Moran amendment passed by a wide margin in the House, however, in order to become a law, the amendment must survive mark-ups in the Senate committee and conference reconciliation between the two branches in the fall. This year’s initial success of the pro-trade amendment is no doubt due in large part to the powerful lobbying efforts by the U.S. farming industry and other business representatives opposed to limitations on their access to profitable trade opportunities in Cuba.

U.S. agriculture and other industries stand to increase their profits considerably, if the Moran amendment succeeds. Combined, exporters sell an average of $800 million worth of agricultural commodities, food and medicine to Cuba annually . The USDA Foreign Agricultural Service reports that although in 2004, Cuba became the 21st largest market for U.S. agricultural exports , the new 2005 Treasury regulation made sales to Cuba more difficult and led to a 22 percent decline in the sale of agricultural products in the Cuban market the following year .

One of the key agricultural sectors that stand to profit from expedited sales to Cuba is the rice industry. Cuba is the largest single grain market in the Caribbean, with 40 percent of the region’s annual imports. For U.S. rice producers, Cuba is an almost captive market, as the United States is a much closer and more convenient source for Cuba than Asia, the next nearest rice exporter. A 2005 USDA Foreign Agricultural Service report on the potential of the Cuban rice market states that “U.S. rice probably stands to benefit the most from greater market access.” Furthermore, “if trade were not restricted, Cuba could replace Mexico and Japan as the top market for U.S. rice in quantity and value.” The huge potential of this untapped agricultural market in Cuba could have a dramatically positive impact on U.S. exports, and private businesses and trade organizations have begun to fight for access to this market in earnest. The Moran amendment’s success thus far demonstrates that when the interests of the domestic industry stand to benefit, the ideological zealotry that keeps the Cuba embargo afloat can be conveniently redefined.

The Energy Crisis Heats Up the Debate

Now that the U.S. oil industry stands to benefit from oil exploration in Cuban waters, proposed legislation could further crack the monolithic anti-Castro front by making an embargo exception for energy companies. The new legislation, titled the “Western Hemisphere Energy Security Act of 2006,” and labeled H.R. 5353 in the House and S. 2787 in the Senate, seeks to provide oil companies with a lucrative loophole to the administration’s otherwise unremitting hard-line stance. This exception will allow U.S. oil firms to pursue oil exploration in Cuban-controlled waters, and is justified as an attempt to resolve the energy crisis through collaboration with the Cuban government.

Steadily increasing competition for limited oil reserves, combined with escalating fears of rising oil prices among the American public, have driven U.S. oil companies to seek out new sources of energy. Moreover, in recent years, suspected Cuban oil reserves in the North Cuban Basin have become much more attractive. Karen Matusic, a spokeswoman for the American Petroleum Institute, a Washington lobbying group representing several companies including Exxon Mobil Corp and Chevron Corp, has stated that her clients support the exemption legislation “in the context of increasing access to oil and gas reserves as a way to ensure U.S. companies’ competitiveness globally.” Furthermore, Cuba’s auctioning of access to oil reserves no more than 50 miles off the U.S. shore, is giving foreign oil companies the advantage on resources in America’s backyard. Recently, oil companies from Norway, India, Spain and China signed drilling deals that grant access to Cuba’s offshore reserves. Demands for an exemption to the trade restrictions being enforced by the Cuba embargo have grown increasingly more forceful among U.S. oil companies, and their support will improve the chances of the Western Hemisphere Energy Security Act of 2006 succeeding in the current session of Congress.

Both the House and Senate versions of the bill are currently in committees; however, because the oil exploration measure is not high on the Congressional priority list, it is uncertain when the issue will be resolved. The deregulation effort has garnered atypical support among members of Congress who generally do not curry engagement with Havana. Senator Pete Domenici, a Republican from New Mexico and chairman of the Senate Committee on Energy and Natural Resources, is a longtime champion of offshore drilling. His co-sponsorship of the Western Hemisphere Energy Security Act in the Senate has lent some hefty bipartisan weight to the legislation. Although the House has not taken a stand on pro-Cuba legislation in years, the interests of the energy sector have given the Energy Security Act a better chance to be passed by the Senate and even to break through the 44-year-long historical freeze on business deals with Cuba.

Bush and Miami: United in Steadfast Opposition

Despite the clear division between Democrats and Republicans on U.S.-Cuban policy, the recent round of voting confirms that Florida still remains the bastion of anti-Castro sentiment in the House, with all of the Sunshine State’s 25 Representatives voting against the embargo-ending amendment and all but one voting against the amendment to loosen restrictions on educational travel to Cuba. Their behavior, though perhaps depressing, is not surprising, considering the ever-present lobbying force of Florida’s vociferous 1-million-plus-strong Cuban-American exile constituency. Another weight on the minds of the Florida delegation is the rapidly approaching midterm election in which 23 of the state’s 25 Representatives are up for re-election. The loud voices of angry pro-embargo rhetoric sounded by Florida Representatives during debate in the House decried the amendments for “provid[ing] assistance to a repressive regime” and rewarding Cuba’s “deadbeat dictator,” but their impassioned arguments hardly concealed their focus on re-election and their thoroughly politicized perspectives on U.S. foreign trade issues.

The powerful factions of conservative members of Congress and the Florida voting bloc are the key congressional base for President Bush’s policy of restricting access to Cuba, with the administration doing its part to oppose Fidel Castro’s regime in every way possible. Recently, the Bush administration has ramped up its counter-Castro activities, even to the hectoring point of pressuring a Sheraton hotel in Mexico to shut down a U.S.-Cuban Trade Association conference held there in February, as well as shuttering Miami travel agencies specializing in travel to Cuba. Furthermore, through a tiff over electricity shortages at the U.S. Interests Section office and by using its Havana facilities to stage frat house antics in contravention of normal diplomatic behavior, the administration has purposefully aggravated hostilities with Havana. Washington also steadfastly opposed Cuba’s successful effort to obtain a seat on the newly formed UN Human Rights Council. Through diplomatic and economic means, the Bush administration continues to narrow the focus on its Cuba policy to the demonization of the Castro regime.

Any loosening of restrictions on the embargo will have to survive the Bush administration’s unremitting anti-Cuba stance, particularly now that Venezuelan oil shipments to Cuba have, in effect, circumvented the U.S. embargo, giving Cuba the necessary time for its own rigs to come online. According to a White House statement, a provision to weaken or lift the sanctions against Cuba is the only such piece of trade-related legislation which could bring about a presidential veto. The threat of a Bush veto has historically defeated congressional efforts to decrease restrictions, and has kept a bill similar to the Moran amendment out of the final Treasury funding measure last year.

The reportedly steadfast intention of the president to veto any legislation containing language weakening the embargo against Cuba may prove no match for the allure of oil riches; much like the environmental integrity of the Alaskan wilderness, the ideological hegemony behind the Cuba embargo may be sacrificed to feed America’s oil hunger. History has shown that human-rights records and democratic failings have not in any way prevented favorable economic relations—the U.S. buys oil from Saudi Arabia and Russia—and Cuba’s substantial oil reserves may be the perfect carrot to entice the U.S. government away from its automatic condemnation of the Cuban government’s actions.

The Battle Continues

In the past, Bush backers have been unified in support of the government’s anti-Castro policies. But recent increased efforts by the administration and the Treasury to further limit economic transactions with the Cuban government, coupled with growing interests in oil-related developments in Cuban waters and robust Cuban agricultural markets, have prompted a turning of the tide among energy lobbies and agricultural industries. As Robert Muse, a Washington attorney who represents U.S. companies with claims against Cuba, has said, “When you have a strong domestic industry, whenever they get involved in the embargo, they win.” As the battle for access to Cuba continues in the legislative branch, the Bush administration and U.S. legislators will have to choose between the stubbornly anti-Castro foreign policy that fuels the embargo or the increasingly demanding private industry lobby seeking new economic opportunities in the previously off-limits, Washington denominated rogue state.

This analysis was prepared by COHA Research Associate Hilary Moise
July 18th, 2006

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