Monday, June 7, 2010

Oil spill opens door to Cuba

Could the oil disaster in the Gulf have a silver lining for U.S.-Cuba relations? Ann Louise Bardach, an award-winning reporter, explores the potential for oil diplomacy with our long estranged neighbor in the wake of the BP accident. Bardach’s latest book is “Without Fidel: A Death Foretold in Miami, Havana and Washington,” which explores the sunset years of Fidel Castro and the complex political legacy he will leave both for Cubans and Americans.

By Ann Louise Bardach

Among the precious few beneficiaries of BP’s mother-of-all-oil spills (outside those who shorted the company's stock) may be diplomacy with Cuba. Or more precisely: oil diplomacy. But after a half century of Cold War chilliness, any chit-chat with our island foe, is progress -- and news.

Concerns about an incursion of floating crude into Cuban waters were relayed by Deputy Foreign Minister Dagoberto Rodríguez to a former U.S. official last week, according to Reuters. At the same time, Rodriguez made it clear that Cuba is "perfectly willing to work with the U.S. on this issue."

In late May, a group of Houston-based oil contractors were given licenses to travel to Cuba, after being initially rebuffed in December. In the wake of the Big Spill, the United States is now keen to discuss environmental and public safety issues with Cuba. And for good reason.

Raul Castro’s ascension to the presidency has coincided with the discovery of oil in Cuba’s northern waters. Deep in the Gulf of Mexico, according to the U.S. Geological Survey, lies close to 5 billion barrels of oil, along with an estimated 10 trillion cubic feet of natural gas, with several oil fields determined to be of "high-quality."

For some time, the Cuban economy has chugged along on virtual life support. But should its oil in the Florida Straits spew forth, Cuba could make the Cinderella-transformation from being a beggar importer to being energy sufficient, possibly even an exporter. And the delectation -- and the relief -- for the Castro brothers could not be richer.

In 1994, four years after losing its annual Soviet subsidy, Cuba had just about run out of cash. On August 5, 1994, thousands of angry stone-throwing citizens descended on the Malecon, the seawall bordering Havana. Known as El Maleconazo, it was the most significant protest on the island since 1959, prompting the largest exodus since the Mariel Boat Lift of 1980.

At the same time, one European oil company -- that requires anonymity -- waited nervously for Cuba to pay its long overdue bill. The company, which supplied the island with a good deal of its oil, much of it on credit, had lost patience. “We decided there would be no more deliveries, unless they paid some of their back bills” recalled a senior executive, who noted that the major oil companies had already bailed on Cuba and terminated deliveries.

It wasn’t long before the oil man received a phone call from a top Cuban government official. “He begged us to deliver. We had a tanker with about 70,000 barrels of oil sitting in Havana Harbor but we told them there would be no more credit,” he said. “He told me that Fidel was on the Malecon himself personally supervising the fleeing balseros (rafters). There was general panic throughout the country. We finally relented -- realizing it was their last chance.”

The company’s tanker docked in Matanzas to avoid the exodus of boats carrying some 40,000 Cubans setting off from Havana. The businessman then waited at a protocol house in the tony suburb of Miramar, giving the Cubans until the weekend to make payment. By Sunday afternoon, no check had arrived. The executive packed his bags and notified his partners that payment had not been made and business with Cuba would be terminated. At four in the afternoon, as he was preparing to leave, a government car pulled up, and one of Cuba’s most powerful men stepped out. Finance Minister Carlos Lage (later deposed in 2008 by Raul Castro), hurried into the house and personally delivered the check, rescuing Cuba from imminent darkness.

These days, fidelista spinners such as Venezuela’s Hugo Chavez have suggested that Cuba’s discovery of black gold warrants its membership in the elite club of oil monopolists. “Cuba could join OPEC," Chavez crowed in 2008.

It was classic Chavez hyperbole but Cuba has indeed signed deals with Brazil’s Petrobras, PDVSA of Venezuela, Spain’s Repsol, India's ONGC, Norway's STATOIL, Vietnam’s state energy cartel, Petrovietnam and Malaysia's state-run Petronas. Recently, China has snagged the leases on five of Cuba’s 59 oil fields in the Florida straits.

“Cuba will begin drilling there by the end of this year,” said Jorge Piñon, former president of Amoco Oil Latin America. “And we need to ask what would happen if a BP-type accident occurs in Cuban waters that could threaten U.S. shores? We need to have some kind of communication mechanism in place” to handle potential catastrophes.

Pinon estimated that “after a 3-5 year development period, Cuba’s reserves could produce about 300,000 barrels per day of oil.” In the meantime, the country enjoys the ongoing benevolence of Chavez, who cheerfully supplies the island with roughly 100,000 barrels a day at terms that would rival Santa Claus. Which is another reason the United States would be wise to pursue diplomacy with the island. An oil bonanza, points out Pinon, could “free Cuba from Venezuela’s influence.” In other words, if and when its oil is pumped to the surface, Cuba would then be free to show Chavez the door, should it choose -- to the everlasting relief of Washington.

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