Russia/Cuba politics: Ties between Cuba and Russia get cosier

Content Type
Country Data and Maps
Institution
Economist Intelligence Unit
Abstract
No abstract is available.
Topic
International Relations, Politics, News Analysis, Forecast
Political Geography
Russia, Cuba

As Venezuela's economic and political crisis deepens and relations with the US return to the freezer, Cuba has sought to strengthen ties with its former cold war allies, most notably Russia. The Cuban-Russian relationship has been supported by visits to each country by their respective leaders, resulting in agreements on intelligence sharing and increased trade and finance. Although the relationship has not approached the closeness of that between Cuba and the Soviet Union, Russia will remain an important trade and investment partner for the Cuban government.

Cuba's relations with Russia have remained cosy since the end of the cold war. More recently, the Russian president, Vladimir Putin, visited Cuba in 2014 and agreed to forgive Cuba's outstanding debt to the Soviet Union. This visit by Mr Putin was followed by visits to Russia's capital, Moscow, by the Cuban president, Raúl Castro, in 2015 and by the first vice-president (and probable eventual successor to Mr Castro), Miguel Díaz-Canel, in 2016. These visits have been complemented by various high-level cabinet meetings.

Venezuela's decline and suspicion of the US drive ties

From the Cuban side, warmer ties with Russia are driven by two major factors. First, Venezuela's deep political and economic crisis has caused it to reduce sharply its shipments of highly subsidised oil to Cuba, on which Cuba is dependent. The Cuban government knows that a change in government in Venezuela would be likely to spell the end of this supply of cheap oil, and could trigger a political and economic crisis in Cuba at a delicate moment, as the country will undergo a leadership transition early next year. Cuba is thus trying to wean itself off Venezuelan aid, and has ramped up its longstanding policy of diversifying its commercial ties.

Second, Russia and Cuba are being yoked together by what they both perceive as US hostility. For Cuba, the election of Donald Trump as US president and his closeness to the anti-Castro lobby in the US mean that a détente with the US looks to be off the cards for the next few years. This will adversely affect economic growth, as the previously expected windfall from US tourism growth will fail to materialise. For Russia, the country's increasingly interventionist foreign policy over the past decade has led to a breakdown of relations with the US and the casting of Mr Putin in particular as a bogeyman by prominent US politicians and media outlets. From Russia's point of view, Cuba is as strategically placed now as it was during the cold war-Florida is just 103 miles away. Increasing economic ties and military co-operation with Cuba thus help to create a Russian ally in the region.

This perceived US hostility has also resulted in joint support for each country in international bodies. Cuba has supported Russian actions in Ukraine and its military intervention in Syria, for example, while Russia has denounced recent US moves against Cuba and has called Mr Trump's language against Cuba "cold war rhetoric".

Trade and investment on the rise

The closer relations have resulted in a slew of planned investment and military co-operation projects, as well as increased bilateral trade. In September 2016 Russia announced a new deal to provide US$4bn in financing to develop infrastructure, aviation, agriculture and telecommunications projects in Cuba in exchange for exports of Cuban pharmaceuticals to Russia. This followed an earlier agreement where Russia granted Cuba the largest single loan that it had received for decades, of US$1.36bn, to expand its power-generating capacity using Russian equipment.

In September the Cuban economy minister and Russian deputy prime minister signed new agreements related to energy and railways. The two countries have also signed an agreement for Russia to provide logistics and software to modernise the Cuban military, with work now underway. In October 2016 the Russian deputy defence minister, Nikolai Pankov, also said that Russia was rethinking its 2002 decision to close the Lourdes intelligence base near Havana, the Cuban capital; during the cold war the facility staffed over 1,000 Soviet engineers and intelligence operatives.

In addition, with oil shipments from Venezuela declining, in May Russia began shipping large quantities of oil to Cuba. The deal was originally to deliver 250,000 tonnes of crude oil and diesel, enough to meet Cuba's requirements for only a couple of days. In October Russia agreed to increase petrol supply and to help Cuba extract more crude oil domestically.

Nevertheless, although trade and finance ties have increased, they remain a far cry from the pre-1990 period. In 2015 (latest available data) Russia was only Cuba's 14th most important trade partner, behind France, Italy and the Netherlands, and only just in front of Belgium. Total trade between Cuba and Russia in 2015 was US$188m, less than a tenth of the amount secured with each of Cuba's two principle trading partners, Venezuela and China. Trade is shooting up, however; according to Russian media, trade in 2016 rose by 82% year on year, and in the first half of 2017 it was up by 61% compared with the same period in 2016. This means that it could reach as high as US$400m by end-2017.

We expect Russia to continue to support the Cuban government through increased trade, finance and investment projects. This will help the Cuban government to avoid a potential crisis brought on by the decline in Venezuelan support and chillier short-term relations with the US. We expect Cuba to continue to rekindle its cold war alliances in search of new trade and investment partners, especially with oil exporters such as Angola and Algeria.

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