Cuba Business

Cuba to get oil from Caracas Accord, wants less dependence on Chavez

Posted November 07, 2009 by publisher in Cuba Business.

By Marc Frank | Reuters

Cuba has chosen to pay a steeper price than it has to for Venezuelan oil so it can discourage itself from becoming too dependent on one source for energy, a senior Cuban official said on Friday.

Deputy Foreign Minister Rogelio Siera Diaz said Cuba chose to get oil under the more expensive “Caracas Accord” instead of through Venezuela’s Petrocaribe group. The goal was to avoid complacency.

“We decided to stay with the Caracas agreement so we would not become too dependent,” Siera said.

PetroCaribe, a Venezuelan initiative with 18 member nations including Cuba, allows for up to 50 percent of the cost of oil to be deferred at 2 percent interest for up to 25 years.

The Caracas agreement, begun in 2000 when oil prices were below $20 per barrel, allows for no more than a 25 percent deferral at a similar interest rate.

Cuba still receives most of its oil from Venezuela, which ships 93,000 barrels per day to help cover the island’s daily demand of 150,000 bpd.

But Cuba also has signed contracts with eight foreign companies to explore the island’s still untapped offshore oil fields in a drive for energy self-sufficiency.

Also, Siera said Cuba has strengthened relations with other oil-producing countries such as Brazil, Algeria, Russia and Angola in part for strategic, energy-related reasons.

“Just like the United States, our foreign policy includes energy considerations,” he said.

Cuba learned the hard way about the disadvantages of depending too much on one ally.

For three decades, the Soviet Union was Cuba’s top benefactor, and when it collapsed in 1991, Cuba plunged into a deep economic crisis. It has only begun to emerge in recent years.

Cuba does not want history to repeat itself, Siera said.

“We would be stupid to fall into the same dependence we had with the Soviet Union and before that the United States,” he said.

Siera said Cuba pays for Venezuelan oil by supplying medical and other professional services to the South American country at prices below those set by the Pan American Health Organization for the region.

He said Cuba has more than 40,000 people working in Venezuela, including about 30,000 medical personnel.

“These are high-quality services, specialists, professionals, paid well around the world and for which a price is set based on cooperation and solidarity for our mutual benefit,” he said.

Details of Cuba’s economic relations with Venezuela are cloaked in secrecy, in particular what the South American country pays for technical assistance, though local economists believe it is around $5 billion per year.

Siera said Communist Cuba’s relations with Venezuela go beyond energy and economics.

They have similar ideologies and a shared vision of a united and independent Latin America where “mutual benefit and preference for the least developed are more important than purely commercial interests.”

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