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posted on 29 November 2016

Some Trades Begin Before Embargos End

from STRATFOR

-- this post authored by Reggie Thompson

The lasting mark that Fidel Castro will leave on Cuba could continue to undercut Havana's outreach to the United States long after his death. Shaped by Castro's ideological vision, the autocratic government that exists in Havana today directly conflicts with U.S. laws governing Washington's relationship with it - a reality that is unlikely to change any time soon. But Cuba did not become an autocracy on its own. Many forces, including the United States, helped set its political path, one that must be traced back more than a century to truly understand Castro and the nation he created.

A Relationship Rooted in Strategy

Cuba's on-again, off-again relationship with the United States wasn't founded on the island nation's political or economic influence, but on its prime location astride the Straits of Florida. For hundreds of years, the sizable stretch of land served as a crucial Caribbean base for the Spanish, who used it as a foothold to project power and control regional shipping. For the United States - a nation built on exports - the ability of a hostile power to restrict adjacent sea lanes, and particularly to the critical port of New Orleans, was unacceptable. It came as little surprise when, in the 1898 Spanish-American War, Washington wrenched Cuba from Spain's grasp and set it on a path to independence. As U.S. global clout grew in the late 19th and early 20th centuries, Cuba became a reliable partner for Washington on its southern periphery.

But their alliance was upended in 1959 when, after years of guerrilla warfare, thousands of Cuban insurgents led by Fidel Castro yanked the country from Fulgencio Batista's grip. As Castro rose to power, Cuba's importance to Washington rose as well, thanks in part to his administration's emergence at the height of a heated competition between the United States and the Soviet Union. Cuba's left-leaning government welcomed an alliance with Moscow, shattering the island's image in the United States as merely a colorful tourist destination and turning it instead into an imminent security threat. The looming southern menace grew in 1962 when the Soviets positioned nuclear ballistic missiles on the island. All the while, Castro's leftist vision was spreading across the region, causing even greater concern in Washington. Even after the Soviet missiles had been removed from the country, the Cuban government maintained its support for insurgencies around the world, interfering with far-reaching U.S. interests.

With the fall of the Soviet Union, Cuba's significance to U.S. strategy diminished. Russia turned inward, focusing its attention on issues closer to home, and without the Kremlin's financial support or ideological imperative to rely on, Cuba became much less of a U.S. concern. A benign remnant of a bygone era, Cuba took the opportunity to revive its relationship with its northern neighbor, leading to warmer political and economic ties with Washington in 2014.

A Force for Change

But for two countries so fundamentally at odds with each other, there are limits to how close they can get. The political system that Fidel and his brother Raul created was not built with the idea of sharing power. Hoping to preserve their reign from the perceived dangers posed by the United States, the Castro brothers showed far less tolerance for political dissent than have most of Cuba's neighbors, long drawing Washington's reproach. Today, the militaristic autocracy they built remains the biggest hurdle to normalizing the island's economic relationship with the United States.

That will not stop Havana from trying to overcome decades of enmity as it looks at the difficult road ahead for the Cuban economy. After ruling the country for 47 years, Fidel stepped back in 2006 as his health worsened, handing the presidential mantle to his brother two years later. But by 2018, power will pass to Raul's designated successor, Miguel Diaz Canel, leaving the single-party state with the trying task of transitioning from the only leadership it has known since 1959. This period of upheaval will be made all the more uncertain by the deterioration of the Cuban government's finances, driven largely by cutbacks in subsidized oil and funding from Venezuela.

Strapped for cash, Cuba will continue the rapprochement it began under U.S. President Barack Obama with his successor, Donald Trump. Still, the effort will not be without risks. For one, it is unclear how long the United States will maintain its embargo against Cuba. Whether or not it is lifted depends entirely on the will of the U.S. Congress and president. According to the Helms-Burton Act of 1996, only Congress can remove the sanctions - and then only when Cuba complies with the law's stipulations on human rights. But some of these requirements run counter to Havana's interests and are unlikely to be met right away for the sake of lifting the embargo. Washington's calls for competitive elections and an independent judiciary, for example, will probably go unheeded by the Cuban government, which still closely resembles the military-led system enshrined under Fidel. Many of the Cuban administration's highest-ranking officials are military veterans whose perceptions of the United States were shaped by Cold War hostility. Apart from their ideological opposition to the United States, complying with Washington's demands would, in many ways, threaten the very existence of the administration in Havana. Should the Communist Party loosen its grip over the government, it could see political and economic power slip from its grasp as well. Presently, the Cuban government controls most of the country's foreign investment, primarily through companies set up by the nation's military. These businesses are a major source of foreign income, and willingly subjecting them to the opposition’s scrutiny would no doubt trigger enough political conflict to undermine the ruling party's ability to manage the island.

Fortunately for Havana, U.S. politicians and businesses seem to have enough interest in the Cuban economy to keep mulling the embargo's continued existence in the coming years. That said, much of Obama's recent outreach was founded on presidential decisions that Trump could promptly overturn once he takes office, should he believe it to be in the United States' best interest to reverse its opening to Cuba. Of course, it is still unclear whether Trump would choose to do so. Removing the embargo has become more of a bipartisan issue in recent years, and although Cuba is a fairly small, low-income market, it has been virtually untapped by U.S. companies since 1959. In theory, the president and U.S. lawmakers could introduce an amendment to the Helms-Burton Act that would lift the human rights requirements attached to the embargo. Such a measure would probably encounter some resistance, given the disapproval of the Cuban government that still lingers in both houses of Congress, but there is also plenty of support on both sides of the aisle for resuming trade with Havana.

As the next U.S. presidential administration begins to formulate its foreign policy, Cuba will almost certainly come up for debate. Momentum is building in Congress to revisit the embargo that has been in place against Cuba for nearly half a century. But at the end of the day, the United States has much less need for a renewed trade relationship than Cuba does, and if Havana is serious about bringing Washington back to the negotiating table, it may need to be prepared to make some substantial concessions to its northern neighbor.

"Some Trades Begin Before Embargos End" is republished with permission of Stratfor.

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