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An Oil-Rich Cuba?

Robert Sandels (sandels [at] unm.edu) writes on Cuba for the online publication Cuba-L Direct (Albuquerque). His articles have also appeared in CounterPunch, Rebellion, Granma International, and other publications. He is a former professor of history at Quinnipiac University in Connecticut and currently lives in Mexico. This article is a co-publication with Cuba-L Direct (http://cuba-l.unm.edu).

Cuba is about to begin drilling for oil in the Gulf of Mexico. If it finds what it is looking for, oil wealth could snatch Cuba out of the century-old grasp of the United States before Obama leaves the White House. This possibility has brought out Miami’s congressional assault team led by the fanatical Representative Ileana Ros-Lehtinen (R-FL), who essentially wants to criminalize drilling in Cuba’s section of the Gulf.

In 2005, tests by Canadian companies found high-quality oil in Cuba’s Exclusive Economic Zone (EEZ), a section of the Gulf of Mexico allotted to Cuba in the 1997 Maritime Boundary Agreement with Mexico and the United States. The U.S. Geological Survey estimated the oil potential in the Cuban zone at 4.6 billion barrels and 9.8 trillion cubic feet of natural gas. Cuba’s state oil company Cubapetroleo (Cupet) says the reserves may be four or five times larger.

Unable to purchase drilling equipment in the United States because of the blockade, Cuba contracted with an Italian company (which in turn contracted with a Chinese company) to build Scarabeo 9, a monster semi-submersible drilling platform. The rig is capable of drilling to 3,600 meters; it is expected to arrive sometime this summer, after which a consortium led by the Spanish firm Repsol-YPF will begin operations in one the EEZ’s fifty-nine blocks. A dozen or so other firms, including Petronas (Malaysia), Gazprom (Russia), CNPC (China), Petrobras (Brazil), Sonangol (Angola), Petrovietnam (Vietnam), and PDVSA (Venezuela) have contracts to explore in other blocks.

Industry experts are not predicting a Cuban oil bonanza, but finding reserves even at the lower end of the estimates would make Cuba energy independent, and eventually a net exporter. This would have an incalculable impact on its economy, and would send the U.S. sanctions policy into the dustbin of imperial miscalculations. To prevent this from happening, there have been legislative efforts like the 2007 bill offered by former Senator Mel Martinez (R-FL). This would have required the State Department both to punish executives of foreign companies that cooperated with Cuba by withholding their visas, and also to fine foreign investors in Cuban oil.1 “Supporting the Castro regime in the development of its petroleum is detrimental to U.S. policy and our national security,” said Martinez in 2007.

Earlier this year, Representative Vern Buchanan (R-FL) offered a similar bill, arguing that Cuba’s deepwater drilling would pose a threat to Florida’s tourism and environment. Spilled oil would reach the Florida coast in three days, said Buchanan.2 He also wants to go after Repsol, first by compelling the Interior Department to deny the company licenses to drill in U.S. waters, and then by urging Obama to force Repsol out of Cuba by pressuring the Spanish government.

The Spanish gambit has gained more traction lately. The current government is predicted to fall in November’s elections, which will put José María Aznar’s conservative (and anti-Cuba) party back in power. Senator Bill Nelson (D-FL) has written to Secretary of State Hillary Clinton advising that by stalling until then, “Spain may have a government less inclined to tolerate investment in Cuba. Until such time as the elections, I urge you to do your utmost to prevent these drilling operations.”3

Nelson has also suggested that the United States unilaterally withdraw from the Maritime Boundary Agreement that set up the zones and then order Cuba to halt explorations. With Scarabeo 9 about to sail toward Cuba, the Nelson scenario raises images of conflict in the Gulf; perhaps he imagines an Oil Rig Crisis and a U.S. naval blockade.

Representative Ros-Lehtinen recently introduced her third no-drill bill, the Caribbean Coral Reef Protection Act, which closely follows Buchanan’s bill. Despite the word “coral,” Ros-Lehtinen admits the aim of the bill is to cripple Cuba’s oil industry. “The U.S. must apply stronger pressure to prevent other companies from engaging commercially, and any other means, with this crooked and corrupt regime,” she said.4

Ros-Lehtinen has not been very active in fighting for tougher drilling regulations to save the reefs following the explosion of BP’s Deepwater Horizon platform last year. Her main concern has been getting BP to pay compensation to tourism businesses and the fishing industry in Florida, given that both have been hurt by the spill. Her advice to “file a claim” does not address the underlying risks of deepwater drilling.5

The justification offered for these efforts is fear that Cuba lacks the necessary technology to prevent oil spills, though the sponsors of these bills do not apply the argument against operations in U.S. waters. Repsol in Cuba waters is not safe; Repsol off the Louisiana coast is safe. Then there is Mexico—not mentioned either—whose Gulf operations are carried out by state-owned Pemex, which has a long history of leaks and blowouts on land, sea, and in the sewers of Guadalajara.6 In 1979, Pemex’s Ixtoc platform in the Bay of Campeche erupted for nine months, sending oil onto the beaches of Texas and Florida in what is still the biggest of all oil spills. BP had to pay compensation for its failures; Mexico paid nothing.

The issue facing the United States is not just Cuba drilling close to the Florida Keys. Drilling operations are in place or planned all over the Gulf. Deepwater Horizon was just one of scores of platforms operating in U.S. Gulf waters. Prior to the BP blowout, there were fifty-seven Gulf platforms, and that number is likely to be exceeded soon. Also joining Cuba in the Gulf as early as next year is the Bahamas Petroleum Company (BPC), which plans to drill just north of Cuba’s eastern tip.

The moratorium Obama placed on deepwater drilling after the BP explosion was lifted last October. Since then, the Interior Department has issued thirty-seven permits for deepwater exploration, some of which include the same foreign companies that are involved in the Cuba project. Then there is Pemex, which took delivery of a Korean-built platform in May and plans to drill to 5,000 meters. Meanwhile, BP has a request pending with the Interior Department to resume operations on its ten existing Gulf platforms and to install new ones.

With foreign companies swarming all over the Gulf, the Miami watchdogs have unanimously settled on Repsol as the threat to coral formations and national security. They have sponsored no bill, however, demanding that Obama threaten Angola, the Bahamas, Brazil, China, Mexico, Norway, India, Malaysia, Russia, Vietnam, or Venezuela.

The U.S. dilemma starts with the contradiction inherent in maintaining a blockade to destroy the same government which the United States now depends upon to help protect the Gulf and coastal states from another platform disaster. In 2006, the Bush administration ordered a Mexico City hotel to kick out Cubans attending a meeting with U.S. oil executives on environmental issues. But during the 2010 BP disaster, when it was a matter of U.S. interest, Cuban officials were invited to a conference in Florida on environmental protection in the Gulf.

The sanctions themselves work against protecting the Gulf. Repsol, for example, had to turn to China for the rig because, under U.S. law, no one can sell anything to Cuba with more than 10 percent content that is made or patented in the United States. Ironically, the closest source for Scarabeo 9’s blowout protector (the part that failed on the Deepwater Horizon well) is the United States, but it is apparently in the interests of the United States to deny a license for its sale to Cuba.

Signs of Cooperation and Indecision

The White House response to all this is a kind of policy opacity where intentions are measured by degrees of inaction. Interior Secretary Ken Salazar would only say that the administration was monitoring the situation and that Cuba’s plans were “an issue of concern.”7

The administration also signaled that it did not want to act on Nelson’s suggestion of tearing up the 1977 agreement. National Security Adviser James Jones wrote Nelson that, “Although we share your concerns regarding the potential risks posed by the development of offshore oil drilling along the Cuban coast, withdrawal from the Maritime Boundary Agreement would be detrimental to U.S. national interests.”8

As for Nelson’s other big idea of muscling the Spanish government into forcing Repsol out, the administration has quietly let Secretary Salazar give Repsol his approval from Europe. Salazar met with Repsol representatives while attending an energy conference in Madrid. They assured him that the company would observe strict U.S. environmental rules, and would allow U.S. inspectors to observe. The U.S. Embassy said there was no pressure on the company and the United States had no objections to its Cuban operations.9

Stumbling on a Regional Energy Bloc

The administration is surely aware that Cuban oil is not just another thing to squelch through sanctions. Cuba is part of Petrocaribe, a region-wide program of exploration, refining, and distribution backed by Venezuelan oil. PDVSA ships 200,000 barrels per day to Petrocaribe member states under a liberal payment plan with up to twenty-five years to pay.

Petrocaribe benefits many Latin American and Caribbean countries that the United States has always sought to influence, control, and sometimes occupy. Petrocaribe began in 2005 as an oil-sharing plan that, instead of seeking absolute trade advantage over non-producing countries, sought to strengthen them, in order to create the basis for political and economic independence from the United States. This is in contrast to capitalism’s dealings with producing states in Africa and the Middle East that have historically been exploited and dependent.

Whether or not Cuba becomes an oil exporter, it plays a geographically and operationally central role as Petrocaribe’s refining, storage, and shipping center. In a joint venture, PDVSA and Cupet have enlarged the Soviet-built refinery in Cienfuegos, while others are to be built in Santiago de Cuba and Matanzas. Matanzas will refine crude from the EEZ operations and ship it from an upgraded super-tanker facility at the Port of Matanzas. The Port of Mariel will be developed with Brazilian capital to serve as the base for EEZ drilling operations.

This vertically integrated system is being planned to expand the energy bloc without U.S. participation.10 Petrocaribe also acts as an infrastructure development machine with capital investments in member countries, including a generating plant in Haiti, a refinery in Nicaragua, the expansion of a refinery in Jamaica, and various renewable energy projects. And where the oil goes, there also are projects in non-energy areas, such as tourism, health services, housing, and education.

Cables released by WikiLeaks have exposed failed attempts by U.S. oil companies and the embassy in Haiti to prevent Venezuelan oil from getting to Haiti and saving it $100 million a year. The fact that in a powerless country like Haiti, then President René Préval could win the struggle against Exxon, Chevron, and the State Department suggests the problems that trying to take away cheap oil might create in the fifteen other countries that benefit from Petrocaribe.11

The Honduran coup of 2009 is another example of how regional independence, fired by affordable oil, allows states to choose between sticking with the United States and joining Latin America. With obvious U.S. support, right-wing elements removed Honduran President Manuel Zelaya in 2009. One of his alleged offenses was that he enrolled Honduras in Petrocaribe, placing Honduras under the influence of Venezuelan President Hugo Chávez. But Honduras’s exit from the energy alliance resulted in oil import costs skyrocketing. Now, prominent business leader and coup-backer Adolfo Facussé is asking President Porfirio Lobo to rejoin Petrocaribe because of the high cost of oil. During the coup, Facussé had warned that along with cheap oil from Venezuela came the importation of “neo-communism.”12

At least in Facussé’s case, the traditional demonizing babble about communism, concentration camps, and the nationalization of babies did not stand up against the tangible advantages of cheap oil. Today, he says Chávez is not such a bad fellow after all, and that he is only trying to help poor countries. We should take the oil and thank him, Facussé says.13

Notes

  1. William E. Gibson, “Florida senators hope to fend off new offshore drilling proposal,” Sun Sentinel, March 15, 2007, http://articles.sun-sentinel.com.
  2. Judson Berger, “Lawmaker Aims to Block Cuba Oil Drilling Near Florida Coast,” January 24, 2011, http://foxnews.com.
  3. Nick Snow, “Clinton asked to seek temporary delay of drilling off Cuba,” Oil & Gas Journal, May 23, 2011, http://ogj.com.
  4. David Goodhue, “Oil rig to drill south of Keys by September,” Miami Herald, May 20, 2011, http://miamiherald.com.
  5. “Ros-Lehtinen Comments on BP Oil Spill Day 35: Urges Keys Business to File Claims with BP for Economic Damage,” May 24, 2010, http://ros-lehtinen.house.gov.
  6. Suburban Emergency Management Project, “The Guadalajara 1992 Sewer Gas Explosion Disaster,” May 3, 2006, http://semp.us.
  7. Andrew Restuccia, “Salazar: Cuban offshore drilling ‘issue of concern’,” The Hill, May 27, 2011, http://thehill.com.
  8. Timothy O’Hara, “Cuba Drilling Sparks Bills,” Florida Keys News, Jan 30, 2011, http://keysnews.com.
  9. Tom Doggett, “Repsol says will drill off Cuba following U.S. rules,” Reuters, June 3, 2011, http://us.mobile.reuters.com.
  10. Robert Sandels, “Cuba-L Analysis—The Other Revolution,” Cuba-L Direct, April 21, 2007, http://cuba-l.unm.edu.
  11. Kim Ives and Dan Coughlin, interviewed by Juan Gonzalez and Amy Goodman, “WikiLeaks Cables Reveal ‘Secret History’ of U.S. Bullying in Haiti at Oil Companies’ Behest,” Democracy Now!, June 3, 2011,http://democracynow.org; Dan Coughlin and Kim Ives, “WikiLeaks Haiti: The PetroCaribe Files,” The Nation, June 1, 2011, http:/ thenation.com.
  12. Yesille C. Ponce, “Honduras: ‘Hay un esquema siniestro…’,” La Prensa, January 26, 2009, http://laprensa.hn.
  13. “Recomiendan a Honduras retornar a Petrocaribe por el alto precio de los combustibles,” El Heraldo.hn, April 5, 2011, www.elheraldo.hn.