US, Cuba Make Competing Policy Tweaks as Island Suffers Blackout
(Bloomberg) --
A tentative step by Cuba’s government to loosen its grip on the island’s economy as it struggles to provide basic services was met with tighter restrictions from President Donald Trump’s administration.
The US said Wednesday it wouldn’t allow fuel deals with the island’s emerging entrepreneurial sector to be brokered through Cuban banks after the nation’s communist government authorized private companies to partner with state-run enterprises.
With two thirds of the Caribbean nation of about 10 million people without power, the incremental measures on either side of the Florida Strait highlighted the difficult path ahead. Washington is trying to increase its leverage on Havana in hopes of bringing about economic and political change, while Cuba’s government is digging in after more than six decades of one-party rule.
Cuba issued new regulations late Tuesday allowing its nascent private sector to hammer out deals with state entities in “any legal area” except education, health and defense. However, the rules allowed agreements to be struck with the business arms of those sectors — meaning companies might be able to work with GAESA, the powerful military business conglomerate that runs much of the economy.
The new law also gives joint ventures broad leeway to decide how many employees they have, set salaries and directly import and export goods. Such arrangements have been recognized since 2021 but were never regulated. And skeptics are likely to urge caution until it’s clear the rules are working and the government begins approving proposals.
Havana is facing an existential struggle as Trump cuts off its fuel supplies. The US, hoping to break the communist regime’s grip on politics and the economy, is also trying to shut down the country’s foreign medical brigades — an important source of hard currency.
While the US emphasized last week it would allow Cuban private companies to import their own fuel, the quantities in play are a fraction of what the island needs. The country’s thermoelectric power plants require about 100,000 barrels of oil a day to meet demand and domestic production accounts for just two fifths of that.
Late Wednesday, the US Bureau of Industry and Security complicated those plans, barring any transaction that involves depositing foreign funds in Cuban-owned banks.
Such transactions “present an unacceptable risk of primarily benefiting the Cuban government and its military or intelligence services,” the agency said in a statement. Instead, exporters and importers will have to route those transactions through third-country financial institutions.
Earlier this week, President Miguel Diaz-Canel told lawmakers that “urgent” change was needed in the economy, including giving the private sector and individual municipalities “more autonomy” — recognition that the state-controlled economy is failing.
Cuba blames Washington’s policies for pushing it to the brink. The United Nations and others have warned the the island of 10 million people is on the verge of a humanitarian crisis as basic services — from electricity to garbage collection — falter.
Secretary of State Marco Rubio is holding talks with Cuban representatives, according to people familiar with the matter, as the Trump administration moves to make the island more reliant on the US for supplies.
Authorities in Havana and Washington, however, appear to be cooperating in the investigation of a deadly shootout between security forces and a group of Cubans living in the US aboard a Florida-registered speedboat off the island’s north coast. The six survivors of the incident were charged with terrorism on Tuesday.
(Recasts with US restrictions on transactions involving in Cuba’s private sector.)
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