THE BLOG
12/18/2014 03:12 pm ET Updated Feb 17, 2015

Behind Cuba's Opening to the U.S.: Dropping Oil Prices Are Forcing an End to Venezuela's Subsidy of the Cuban Economy

ASSOCIATED PRESS

MEXICO CITY -- The release of the American prisoner/spy/hostage Alan Gross by the Cuban government, and that of three Cuban spies/heroes/undercover agents held in the United States, along with the respective announcements and phone calls between Raúl Castro and Barack Obama, marks the most important moment in the history of the relations between the U.S. and the island since 1977. Back then, Jimmy Carter and Fidel Castro signed several agreements between both governments that allowed the opening of two administrative offices in each capital.

The intervention of the Vatican and Canada, one of the most anti-Castro governments in the democratic world, was decisive, and it ensures the fulfillment of the stages of the accord. The bravery of Barack Obama and Raúl Castro guarantees the rest.

It is not the end of the embargo. That can only be changed by the American Congress. In fact, it is not a full normalization of relations: there will be embassies, but there won't be any ambassadors.

Nevertheless, it is a notable advance: Americans without Cuban relatives will find it much easier to travel to Havana; financial movements between both nations will be freed up; some commercial operations will be allowed; and the State Department will remove Cuba from the list of countries that support terrorism.

"At first sight, all of this suggests a victory for Cuba, an American retreat, and a late but welcome rectification. . . Yet there is still one more variable missing from the equation."

At first sight, all of this suggests a victory for Cuba, an American retreat, and a late but welcome rectification. It looks like a confirmation of some of the most pro-Cuban and anti-Yankee positions in Latin America. After all, Cuba does not give much in return: Gross, the release of 53 political prisoners, allowing the presence of the International Red Cross and of UN human rights rapporteurs (something we asked for 14 years ago), and the expansion of Internet access throughout the island. It's not a big deal when measured against what they are receiving: reestablishment of diplomatic relations after more than half a century of ostracism.

AN OILY DEAL WITH CUBA

Yet there is still one more variable missing from the equation. Where can we find it? The answer can be somewhat surprising: in Caracas, in Moscow, and in the gas and shale basins of North Dakota and Eagle Ford, Texas. Let me explain myself.

Oil prices have recently plummeted due to the spectacular increase of oil production in the United States combined with the European and Japanese economic recessions and the slowdown of the Chinese and Indian economies. The Saudis have contributed to falling prices by maintaining production levels, despite the drop in demand, in order to undercut oil producing countries such as Iran that are not friendly to Riyadh. Meanwhile, the Mexican government has enough reserves to last through next year.

But there are two countries that aren't as lucky: Russia and Venezuela. Those two nations are precisely the ones that would have been able to sustain the inexistent Cuban economy. In effect, Venezuela was the one keeping it afloat, and Russia was heralded as a new beacon of hope, one that could act as a new Venezuela once Nicolás Maduro and whatever remains of his party failed to rescue the island from its financial woes.

The case of Venezuela is the most significant one. The state's income and the economy as a whole has plunged. Not only that: the black market exchange rate is 30 times the official one, hyperinflation is just around the corner, basic products are hard to find, and countries that previously benefited from Venezuelan oil subsidies are now buying their debt at 40 cents to the dollar.

For anyone who can still see straight, it is obvious that Venezuela won't be able to keep on subsidizing the Castro regime with 100,000 daily oil barrels. Moreover, each day it becomes likelier that there will soon be a major political overhaul in Venezuela, one that, in one way or the other, will spell an end to the island's economic salvation.

"It doesn't make sense that Obama gave so much to Raúl in exchange for so little. . .Who would have thought that oil tycoons in North Dakota and Texas, along with Saudi princes, would manage to open up the Castro regime's tight control when no one else could?"

Thus the circle is closed. All economists who have studied the so-called Cuban reforms acknowledge that they have not been effective. The island's economy is in shambles. Everyone admits that without Venezuela's subsidies, Cuba will once again be immersed in a crisis similar to the one it lived through in the 90s. And everyone knows that the likelihood of success of the Cuban reforms is tied to complete normalization of relations with the United States. But despite Obama's goodwill and that of many democrats in Washington, that normalization was impossible without some type of concession on human rights and democracy on behalf of the Cuban government.

As the book Back Channel to Cuba: The Hidden History of Negotiations between Washington and Havana, demonstrates, Cubans have always refused to negotiate their political regime against the end of the embargo or the normalization of relations with the United States. Therefore, none of that was included in Wednesday's announcements. But I would bet, with odds of two to one, that we will soon see some important changes regarding human rights policies in Cuba.

It doesn't make sense that Obama gave so much to Raúl in exchange for so little. The force correlation between both nations is what it is, and the so far non-existent Cuban pragmatism has been imposed by necessity on the regime. Who would have thought that oil tycoons in North Dakota and Texas, along with Saudi princes, would manage to open up the Castro regime's tight control when no one else could?

PHOTO GALLERY
7 Reasons The Cuba Embargo Needs To Go