Cuba Embargo Myopia Misses the Strategic Point

December 6, 2016

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Fidel Castro’s recent death closed a long and languished chapter in the continuing story of relations between the United States and Cuba. Triggering both mourning and celebration, reactions to Castro’s passing parallel the emotional and polarizing debate regarding whether the United States should end its decades-old trade embargo on Cuba, which might be the next big fight over the direction of U.S.-Cuban relations. Opponents of rapprochement contend that a conciliatory approach strengthens Cuba’s communist regime, undermines social reform, and weakens America’s image as a bastion of freedom. The irony of their premise is that the 56-year embargo allowed the Castro regime to easily use the United States as a scapegoat, kept Cuban civil liberties stagnant, and marginalized American influence throughout Latin America.

However, it is myopic to focus on the merits of rapprochement as an end in itself rather than as a means to an end. Viewed through a broader geopolitical lens, lifting trade and economic restrictions and abandoning the rhetoric of a bygone era has significant geostrategic benefits. Ending the embargo will not only contribute to economic growth and stability in Cuba, it will also foster restoration of U.S. influence throughout Latin America and counter the growing influence of China and Russia in the region.

Restoring influence in Latin America

America’s strategic focus in Latin America experienced challenges over the past two decades as vital national security priorities such as an economic crisis, combat operations in Iraq and Afghanistan, and a pivot to the Pacific took precedence. Despite these distractions, the United States and Latin America achieved some modest and mutually beneficial gains during this period, such as the 2012 U.S.-Colombia Trade Promotion Agreement and the Mérida Initiative for Mexico and Central America. However, hemispheric achievements remained marred by America’s dark legacy in the region, which is still resented by many in countries such as Colombia, Panama, Nicaragua, and Venezuela.

Washington’s covert and controversial activities in the 1980s led many Latin America countries to discount the United States as a dependable partner, and they instead turned to other nations such as China and Russia to achieve national priorities. This erosion of trust also provided opportunities for populist movements such as the Bolivarian Revolution, a nationalistic movement espousing a unified South America, to capitalize on discontent and further inflame anti-American sentiment.

No other issue fueled anti-Americanism more in Latin America than the Cuba trade embargo. A visceral reminder of Cold War politics, the embargo repeatedly undermined the United States’ achievement of hemispheric policy objectives. In fact, American delegates were hindered from accomplishing their agenda at the 2012 Summit of the Americas by Latin American representatives who used the venue as a means to pressure the United States to lift the embargo.The summit was so dysfunctional that it ended with the heads of state walking out without issuing a joint declaration, further exacerbating the divide between Washington and Latin America.

This sticking point in U.S.-Latin America relations seemed to reach a resolution in December 2014, when Cuba and the United States resumed diplomatic relations and opened talks aimed at lifting the trade embargo. Matt Ferchen, a resident scholar at the Carnegie-Tsinghua Center for Global Policy, believes “the Cuba deal changes everything in terms of how the United States can set a positive agenda in the region.” Rapprochement quickly reshaped U.S. image and influence in Latin America, with many of the region’s influential leaders hailing the thawing of relations as “positive.” When Presidents Barack Obama and Raul Castro shook hands at the April 2015 Summit of the Americas in Panama, discussions moved on from the embargo to larger substantive issues challenging the region such as trade, partnerships, and human rights.

Economic Growth in Cuba

The U.S. restoration of diplomatic ties with Cuba presented an opportunity to shift focus from longstanding political frustration to economic growth and stability. Following the announcement, the U.S. Treasury Department relaxed several barriers hindering economic progress in Cuba including increasing remittance limits, easing trade sanctions on telecommunications and internet-based services, and reducing travel and commercial goods restrictions between the two countries.

While the United States has tepidly eased a number of restrictions since announcing the warming of relations, Cuba has been steadily transforming its economy since Raul Castro was given the presidency in 2008. Addressing the Cuban parliament in 2010, the younger Castro proclaimed a need to continue addressing economic issues or they would “run out of time walking on the edge of the abyss.” His pragmatic vision and efforts, albeit slow and deliberate, have led to Cuba’s centralized socialist economy moving toward a more market-oriented model.

In April 2015, the Cuban Council of Ministers announced renewed emphasis on gradually unifying the country’s two-currency system. This significant economic reform will benefit Cubans by allowing income parity between workers in the private sector and state-owned enterprises, as well as make it easier for economists to accurately estimate value between the two types of businesses. Council ministers have also begun to restructure their debt and develop tax incentives for investors to demonstrate a commitment to international standards.

Cuba’s economic reforms have also stimulated business development within the country, paving way for the emergence of non-state cooperatives known as “cuentapropistas.” These non-state ventures have grown significantly over the past two years, employing over 500,000 Cubans and accounting for nearly ten percent of the country’s gross domestic product in 2014. In addition to the expansion of non-state ventures, Cubans can now seek licenses in over 270 labor categories. Once restricted to government employment, self-employed Cubans now earn a living in agriculture, hospitality and transportation, and in the goods and services industry. They have opened hotels, coffee shops, and restaurants that now employ other Cubans.

Foreign direct investment has increased in large projects, such as the Mariel Port and Free Trade Project. This new deep water mega-port located west of Havana along the north coast is strategically positioned to attract commercial ships transiting the Panama Canal from Asia and to serve as a transfer hub for distribution throughout the region. Funded almost wholly by Brazil, the initiative expects to employ up to 5,000 Cubans.

The Mariel Port also includes the Special Economic Development Zone of Mariel. This 180-square-mile free trade and development zone looks to “encourage the nation’s sustainable economic development by attracting foreign investment, technological innovation and industrial concentration while at the same time ensuring environmental protection.” Offering tax and customs incentives to attract business, Chinese investors have expressed interest in opening an automotive factory, Brazil sees potential for pharmaceutical production, and investors from Belgium, Spain, and Mexico are attracted to it for light manufacturing operations.

Though American investors are equally interested in Cuba’s commercial potential, many are unable to make financial commitments until the embargo and trade sanctions are lifted. Yet some investors have been able to take advantage of loosening trade restrictions. In February 2016, a privately owned manufacturer of agricultural and light construction equipment based out of Paint Rock, Alabama was authorized by the U.S. Treasury Department’s Office of Foreign Assets Control to build a tractor manufacturing facility in Cuba. The facility will be located in the Special Economic Development Zone of Mariel, where it will provide manufacturing jobs to the Cuban population and assist with growing the agricultural sector, which employs nearly 20 percent of the Cuban labor force.

Unfortunately, with sanctions still in place, the United States cannot capitalize on similar business opportunities. The only real losers here are the U.S. and Cuban economies, but Havana is compensating by finding willing customers elsewhere. Until trade restrictions are removed, business entities such as the Virginia Port Authority, which explored the potential of increased agricultural exports to Cuba for Virginia farmers in January 2016, are relegated to expressing interest as they watch international companies take advantage of the lack of competition.  According to a 2005 estimate, the United States economy loses out on over one billion dollars in missed sales each year due to the trade embargo.

The Longer View

In addition to increasing U.S. influence in Latin America and developing mutually beneficial economic ties with Cuba, lifting the embargo also provides the United States a way to counter Russian and Chinese influence in the region. While the United States was bogged down in the Middle East and the Hindu Kush, China pivoted to Latin America and launched a sustained diplomatic campaign. More recently, Russia increased its engagement in the region to counter the isolation brought on by Western sanctions and challenge U.S. primacy in the western hemisphere.

China’s efforts in Latin America are focused on trade, military alliances, and geostrategic advantage. As the world grappled with the 2008 financial crisis, China exponentially increased its investments in Latin America. By 2012, China’s foreign direct investment in Latin America had tripled to nearly $90 billion. In 2015, China committed to a number of bilateral agreements worth $500 billion in future trade revenue. Furthermore, the likely death of the Trans-Pacific Partnership paves the way for China’s alternative, the Regional Comprehensive Economic Partnership, to increase in influence across the region. Peru has already opened talks with Beijing to join.

In addition to Latin America’s economic value, China also views the region as a platform for power projection. Though not actively increasing its military footprint in the western hemisphere, China has expanded its military activity in the region through military sales and humanitarian activities, and it conducted bilateral naval exercises with Brazil and Chile.

Russia has re-emerged in the hemisphere to project power and directly challenge U.S. foreign policy objectives. During President Vladimir Putin’s recent visit to Havana, he eliminated $32 billion (or 90 percent) of Cuba’s Soviet Union-era debt. Putin’s gesture may be due to interest in Cuba’s offshore oil reserves of up to 20 billion barrels. However, he likely had other interests in mind, such as re-opening the Lourdes signals intelligence facility.

Moscow has also negotiated the transfer of 50 T-72 tanks to the Nicaraguan government in exchange for building a Russian signals intelligence facility on its Caribbean coast. Mark Schneider, a former Pentagon policymaker, believes Russia’s selling of military weaponry and capability are meant to secure military basing in the region. This modus operandi would be consistent with Putin’s global basing aspirations, which would significantly extend Russia’s limited sea lines of communication. In fact, Nicaragua recently eased restrictions to allow Russian warships into port.

In order to counter challenges to the United States’ influence in the region, R. Evan Ellis of the U. S. Army War College believes that the United States “should take advantage of the extraordinary opportunity provided by rapprochement with Cuba.” With Latin America’s trade interests more closely aligned with the United States than China and Russia, increasing American involvement in trade alliances similar to the Pacific Alliance presents ways in which to counter Chinese and Russian objectives in Latin America.

Lift the Embargo

Pundits argue that normalizing diplomatic ties with Cuba prior to gaining human rights concessions is an ill-conceived bargain. While the United States is best-positioned to promote the advancement of civil liberties, that’s not a Cuban issue alone, but rather a broader foreign policy conundrum. To say the United States shouldn’t lift the embargo due to current sociopolitical conditions ignores the fact the United States has ongoing relations with countries around the globe such as Bolivia, Mexico, China, and others with equally questionable human rights records.

Skeptics also believe that lifting the embargo and allowing increased investment in Cuba will benefit the Castro regime rather than the Cuban people. Though a valid concern, the United States could easily reinstate sanctions to compel compliance if monitoring revealed revenue was lining the pockets of the Cuban government and not Cubans themselves. However, rather than apply broad economic sanctions that affect tyrants and innocent alike, targeted sanctions could be implemented. Targeted sanctions were effectively used in 2015 against Russia and Venezuela, where the United States placed trade sanctions on social elites and their businesses. These sanctions led to increased pressure on the country’s leadership rather than on citizens. Furthermore, the reality of a market-driven economy is that corruption typically drives out your cash cows.

Vision for the Future

During the U.S. response to the Soviet military buildup in Cuba, President John F. Kennedy addressed the American public and stated that “our goal is not the victory of might, but the vindication of right; not peace at the expense of freedom, but both peace and freedom, here in this hemisphere…” The essence of his message remains as relevant today as it was back then.

Fidel Castro’s passing presents an opportunity to put the ghosts of a bygone era to rest. Though a change will be challenging in the current frenetic political environment, the United States has reached an inflection point. Continuing the trade embargo punishes the Cuban population and further degrades U.S. influence throughout the hemisphere. It is time to focus on the longer view and lift sanctions. This significant gesture will not only remove a long-standing impediment to U.S.-Latin American relations, but it will also greatly benefit the economies of the United States and Cuba. Most importantly, strengthening of relations throughout Latin America will successfully position the United States to counter growing Russian and Chinese influence in our backyard.

 

Shawn Lansing is an active duty Coast Guard officer and recent graduate of the U.S. Naval War College. The views expressed in this article are those of the author and do not reflect the official policy or position of the U.S. Coast Guard or the Department of Homeland Security.

Image: NASA

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2 thoughts on “Cuba Embargo Myopia Misses the Strategic Point

  1. Cuba has the world to trade with, lack of trade with the US is not holding Cuba back, communisim is. What Cuba wants is access to American financial markets and Cuban (communist) controlled foreign investment. They deserve none from the US.

    If the OAS is upset with the US embargo they can put they’re money where their mouths are and not do business with the US (not likely) or invest in Cuba (also unlikely).

    As for Daniel Ortega’s deal for 50 Russian tanks, somebody needs to sell that dope a bridge. Really 50 surplus T-72’s , in a couple of years most will be rusting in place.

  2. Or

    Cuba continues to occupy a strategic geographic location we would not want Russia or China to develop excessively close ties with and it might be in our interest to do something about.

    And banning trading with Communists is apparently not our first strategic concern if I look across the Pacific.

    So if Communism is no longer our first concern since Russia no longer fits in the category, perhaps “non-representative” governments?

    Either way you slice it, I am uncomfortable with more than commercial interests by either nation in my hemisphere, including the Azores and South America.