[Marxism] Cuban oil renews embargo debate
lnp3 at panix.com
Sun Jul 30 07:06:10 MDT 2006
Cuban oil renews embargo debate
Discovery of sizeable reserves means U.S. trade ban may finally have a cost
The Associated Press
Updated: 7:40 p.m. ET July 29, 2006
MIAMI - Some facts about Americas trade embargo with Cuba:
Its been U.S. policy since 1961.
It has yet to loosen Fidel Castros grip on power.
It has cost America little strategically or economically.
Until now, that is.
From here on out, say a growing chorus of experts, America will pay a
price for maintaining its 45-year trade ban with the communist nation a
strategic and economic price that will have negative repercussions for the
United States in the decades to come.
What has changed the equation?
To be more specific, recent, sizable discoveries of it in the North Cuba
Basin deep-water fields that have already drawn the interest of companies
from China, India, Norway, Spain, Canada, Venezuela and Brazil.
Embargo past its prime?
This, in turn, has reheated debate in the U.S. Congress and the
Cuban-American community on an old question:
Has the time finally come to shelve the embargo given Americas need for
more sources of crude at a time of rising gas prices, soaring global demand
and the outbreak of war in the Middle East?
Jonathan Benjamin-Alvarado, an expert on Cuba energy matters and a
political science professor at the University of Nebraska at Omaha, says
Americas thirst for oil will soon force a fundamental change in
Washingtons relations with Havana.
Ive always argued that we would keep the Cuban embargo in place until we
got to the point where it started to cost us something. Today, he adds,
were almost there.
Says Phil Peters, vice president of the Lexington Institute, a think tank
in Arlington, Va., that defends limited government and free trade, and a
Cuba expert: If Cuba discovers a lot of oil and becomes an oil exporter,
the embargo almost becomes an absurdity.
Kirby Jones, founder and president of the U.S.-Cuba Trade Association in
Washington, D.C., which has long sought an end to the trade ban, says the
reality of Cuba as an oil producer makes the embargo too costly a policy to
Our choice is: Are we going to let those other countries take that oil? Or
are we going to look at our strategic interests and recognize that very
close to our shores is a substantial quantity of oil that is going to be
Cuba has been oil hunting, not always successfully, for decades.
With Soviet help, it discovered the Varadero Oil Field in 1971. This
reservoir, within 5 miles of Cubas northern coast, today yields about 40
percent of Cubas total production roughly 75,000 barrels a day of
poor-quality, heavy, sour crude.
In July 2004, however, the Spanish oil company Repsol-YPF, in partnership
with Cubas state oil company, CUPET, identified five fields it classified
as high-quality in the deep water of the Florida Straits, 20 miles
northeast of Havana.
Seven months later, a report by the U.S. Geological Survey confirmed it:
The North Cuba Basin held a substantial quantity of oil 4.6 billion to
9.3 billion barrels of crude and 9.8 trillion to 21.8 trillion cubic feet
of natural gas. Cuba wasted no time, dividing the 74,000 square mile
(120,000 square kilometer) area into 59 exploration blocks, and then
welcoming foreign oil conglomerates with offers of production-sharing
Oil companies from China and Canada, already prospecting for oil along
Cubas coast, began talks with Cuban energy officials about investments in
Then, in May, Spains Repsol-YPF announced it was partnering with Indias
Oil and Natural Gas Corp., and Norsk Hydro ASA of Norway to explore for oil
and gas in six of the 59 deep-water blocks along Cubas maritime border
with the United States. (Sherritt International Corp., the Canadian oil
company, has acquired exploration rights in four of the deep-sea blocks.)
That raised the eyebrows of many an oil executive, says Jorge Pinon, a
former senior executive with Amoco Oil and a research associate at the
Institute for Cuban and Cuban-American Studies at the University of Miami.
Breaking the blockade
Norsk and ONGC are among a select group of companies with deep-water
know-how and technology, so when they signed on with the Spanish, everyone
else said, Maybe we better take a look at Cuba again.
The U.S. Congress certainly has.
In May, with much fanfare, Rep. Jeff Flake, R-Ariz., and Sen. Larry Craig,
R-Idaho, introduced twin bills to the House and Senate that would exempt
Big Oil from the embargo.
Before introducing his legislation, Craig told a reporter that prohibition
on trade with Cuba has accomplished just about zero. Ominously, he added:
China, as we speak, has a drilling rig off the coast of Cuba. (The
senator failed to mention that the Chinese are working in shallow water
near Cubas shore, and possess neither the technology nor the expertise to
tap Cubas promising deep-water reserves.)
Regardless, the bills represent the best chance yet to punch a big hole
into the embargo, says Johannes Werner, editor of Cuba Trade & Investment
News, published in Sarasota, Fla.
Chorus of opposition
That scenario raises the hackles of the conservative, and highly
influential, Cuban-American voting lobby of south Florida not exactly
what President Bush, or his brother, Jeb, who occupies the governors
mansion in Florida, would prefer three months before midterm elections.
Says Alfredo Mesa, executive director of the Cuban American National
Foundation in Miami: Those who would advocate for ... allowing U.S.
companies to drill off Cuba lose sight of how that would damage our ability
to press the Cuban government on other issues, such as human rights.
Environmentalists are also squarely set against oil-industry access to
Cuba, though for different reasons. Oil spills even routine toxic
pollution from drilling could pollute the Everglades and Floridas most
economically important beaches, they say, and wreck the states tourism
Thanks to Sen. Bill Nelson, D-Fla., and Rep. Jim Davis, D-Fla., they, too,
have measures in Congress for which to cheer: twin bills that would deny
U.S. visas to executives of foreign companies that drill for oil in Cuban
Nelsons bill would undo a 1977 maritime boundary agreement between the
countries that bisects the Straits of Florida and allows Cuba to perform
commercial activities (e.g., oil drilling) near the Florida Keys.
Its not clear how this could keep the Cubans from exploiting waters closer
to their shores than Americas. One semiofficial response from Cuba, an
editorial by the state-run Prensa Latina newswire, called the measures
Time to think it over
How likely is it that Congress will act?
If the oil industry continues to sit on the fence as it has been not too
likely, especially with this administration and Congress, says Werner,
editor of the Cuba trade newsletter. But there are elections in November,
which could change the whole equation.
Peters, of the Lexington Institute, agrees. I think if you call (oil
companies) up and ask them, What is your position on this? theyd say
yes, were behind an exemption in the embargo. But Im not sure if they
would get behind it in a major way yet.
In response to queries from The Associated Press, the American Petroleum
Institute in Washington, D.C., the industrys lobbying arm, issued this
We cannot speak to individual interest in Cuba, but we can say that API
members are more focused on expanding access on the U.S. portion of the
outer continental shelf, which is much closer to the existing pipeline
network and where they have more information about oil and natural gas
All of this is still somewhat premature, says Pinon, the former oil
executive and research associate. We are still three to five years away
from commercializing any of those Cuban reserves.
There is at least an 18-month backlog on the leasing of deep-water rigs, he
says, and crude oil is worth zero if you cant move it or process it. Even
if they find the oil, what are they going to do with it?
Benjamin-Alvarado, a regular visitor to Cuba who has been following that
nations energy development for 15 years, concurs. Cuba, he says, needs
help downstreaming upgrading its ports, refineries and maintenance
Already, though, Venezuelas state oil monopoly, PDVSA, has signed a $100
million deal to revamp Cubas Cienfuegos refinery, a Russian relic from
Cold-War days, and to increase oil storage capacity at the Port of Matanzas.
Every day the United States puts off making the path into Cuba, that
window of opportunity closes a little more, says Benjamin-Alvarado. Once
Cuba gets to the platform stage of deep-water drilling, he says, the
Americans are going to be left out.
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