Cuba would have to spend nearly $2 billion a year to meet its domestic oil needs if Venezuela’s National Assembly and interim president Juan Guaidó manage to stop deliveries to the Caribbean island.
“Cuba’s demand for oil is about 130,000 barrels per day, and Cuba produces about 50,000 barrels per day, which means a deficit of about 80,000 barrels per day,” said Jorge Piñón, director of the Latin American Energy Program at the University of Texas at Austin.
Piñón estimates that Cuba has fuel reserves for about 45 days. But the end of deliveries by Venezuela’s PDVSA oil company would force the government to spend nearly $5.2 million per day at the market price of $65 per barrel for the 80,000 barrels per day it would need to import to meet demand.
By the end of one year, that would add up to nearly $2 billion for an economy that economists agree has not reached 2 percent annual growth in recent years and has probably experienced a recession.
The National Assembly, controlled by the opposition, recently ordered a suspension of crude shipments to Cuba, which started under an agreement to exchange oil for medical services negotiated by the late Fidel Castro and Hugo Chávez.
PDVSA now ships an estimated 40,000 to 50,000 barrels per day to Cuba, not quite half of what the oil company sent before it spiraled into an unprecedented crisis under the Nicolás Maduro regime.
It is not clear if the National Assembly and Guaidó’s interim government can keep PDVSA from continuing to ship oil to the island. The U.S. government is considering sanctions on companies involved in those shipments, a senior Trump administration official told el Nuevo Herald.
Faced with shrinking Venezuelan subsidies, the Cuban government has been reducing fuel consumption and food imports, while experiencing problems paying its debts. An end to the shipments would force Havana to reduce domestic consumption even further and could bring a return of the infamous power blackouts.
Trying to meet demand in the short run, the Cuban government has been buying crude in other markets.
“For example, the tanker Nordic Gas arrived in Havana March 2 with 200,000 barrels of liquefied gas from the Dominican Republic,” Piñón told el Nuevo Herald. “And the tanker Zefryos was due in Havana, from Antwerp, Belgium, March 20 carrying 335,000 barrels of diesel.”
The government also has negotiated the purchase of crude from countries such as Russia and Algeria. After Guaidó’s challenge to Maduro deepened Venezuela’s crisis, the Cuban minister of foreign commerce and foreign investment, Rodrigo Malmierca, traveled to Algeria in mid-February and met with that country’s foreign and finance ministers. But the Algerian government is facing its own crisis because of protests against 82-year-old President Abdelaziz Bouteflika.
Russia’s Rosneft oil company did increase its shipments of crude to Cuba, but it’s not clear how much of that oil is being paid for by PDVSA.
“Cuba produces 50 percent of the crude it needs, and that oil, which is not good quality, is used to generate electricity,” said Cuban economist Omar Everleny Pérez. “There are other emerging markets, like Angola and Russia, but the issue is the payment because the [oil] companies in those countries are private, not government-owned. There are also small efforts to produce electricity with solar power parks around the country.”
Experts agree that the end of Venezuelan assistance would set off an economic crisis on the island, although not as terrible as the so-called Special Period in the 1990s, when the island’s gross domestic product shrank by 35 percent.
Amid all the uncertainty, the Cuban government, which has given no hint that it might reduce its support for Maduro, has stepped up investments in tourism in order to increase revenues. Cuban leader Miguel Díaz-Canel has also insisted on the need to attract more foreign investments.
Economists also point to the private sector, which now employs about 500,000 Cubans, as another factor making the current situation different from the Special Period, which was triggered by the collapse of the Soviet bloc.
But those sectors may be directly affected by new sanctions and regulations adopted by the U.S. government in order to put economic pressure on the Cuban government and force it to withdraw its support for Maduro.
The U.S. government has partially activated Title III of the Helms-Burton law and threatened more sanctions in what amounts to a direct threat to foreigners investing on the island. Travel from the United States to Cuba continues to be legal, but the staff reductions at the U.S. embassy in Havana and travel alerts sparked by alleged attacks on some diplomats have had a negative impact on U.S. travel to Cuba.
What’s more, the changes in U.S. visa policies for Cubans announced last week will have a negative impact on the private sector, experts, activists and business owners have warned.
“Regardless of what happens, if those shipments from Venezuela are eliminated … that’s a considerable impact,” said Pérez.