The Castro regime has long managed to postpone reforms, which would strengthen the economy but also constitute an admission that Fidel’s revolution had failed. And postponing this reckoning became lately possible thanks to the huge subsidies that Cuba received from Venezuela for more than a decade. That lifeline is now at risk.
Again, biology has intervened. President Hugo Chávez death from cancer in 2013 has stoked political instability in Venezuela, as his handpicked successor Nicolás Maduro has proven ineffectual in tackling the nation’s many problems and overcoming power struggles between different factions of Chávez supporters. Venezuela’s economic collapse and institutional chaos was an important factor in motivating the Cuban regime to look for alternatives to Caracas’s largesse.
This would not be the first time that Havana successfully switched benefactors. In the early 1990s, the collapse of the Soviet Union created a painful economic crisis in Cuba. At the time, Russia’s nascent regime halted a subsidy ($5 to $6 billion annually) that had been keeping the island’s economy afloat. Many factors contributed to the Soviet Union’s demise, but among them was a steep decline in oil prices from 1985 to 1991, which meant a loss of approximately $20 billion per year—a severe blow to the Soviet economy that strengthened the hand of reformers in the country.
With Russia no longer willing to sustain Cuba’s economy, the island entered into a painful time of extreme economic austerity known as the “special period.” After a prolonged ordeal, in the early years of this century, Cuba ably created a replacement for its old Soviet benefactor: Chávez’s newly elected Venezuelan government. For almost a decade, Cuba has been receiving about 100,000 barrels of subsidized Venezuelan oil per day. Assuming an average price of $100 per barrel, this would amount to over $36 billion that the Cubans have been paying for in kind: Cuban sports trainers, doctors, security services, military training, and agricultural products cover just a fraction of what Venezuela could have earned by selling its oil in the open market.
But the oil market has changed. Prices have dropped to around $60 a barrel (down 50 percent since June). Weak global demand for energy compounded with a dramatically increased supply, thanks to new technologies like fracking in the United States, have battered countries like Venezuela that are dependent on revenue from oil exports.
The impact of lower oil prices on international relations is evident in Cuba’s new stance toward its northern neighbor. In the same way that it replaced the Soviet Union with Venezuela, Cuba is now hoping to replace the Bolivarian Republic with remittances, tourism, trade, and investments from the United States, its longtime nemesis.
What’s the upshot of the rapprochement between the U.S. and Cuba—the offspring of biology and technology? Cuba is unlikely to embark on a political opening any time soon, unless the current regime suddenly implodes. Cuba’s dictatorship has proven very resilient to political pressures, and systematically and brutally clamps down on dissidents. The government will surely try to maintain its chokehold on the population; at times, the repression may even become harsher as the need to reassert the regime’s power mounts. But in the long run, it will be hard for the Castro regime to maintain a tightly controlled political system if it allows more freedom of communication, travel, commerce, and investment. It’s easier to keep a lid on politics when a country is closed, hungry, and isolated than when it’s more open to the world.
In the aftermath of the agreement, the Cuban government will no longer be able to blame the island’s bankruptcy on U.S. policies. Throughout Latin America, the embargo has been perceived as a relic of heavy-handed U.S. intervention in the region. But that symbol is now fading for critics of the United States. If a closer relationship with America is good for its archenemy Cuba, how can it not also be good for other nations like giant Brazil or tiny Bolivia—two nations that have a fraught relationship with the U.S.? The unintended consequences of the deal are likely to be as surprising as they are varied.
The Cuba Deal: Why Now? – Atlantic Mobile