After 53 years of rancor and mistrust, Cuba and the US are renewing diplomatic relations. Among the many factors which might have motivated the warring partners to call off their animosity could be oil.
Experts contend that one of the most productive oil and gas basins on the planet sits just off the North-West coast of Cuba. With its relations with the US on the mends, it now hopes that the Cuban Oil and Gas industry can finally get into action. The prospect has been welcomed by Cubans who are desperate to kick start their economy and achieve some parity in living standards of their superpower neighbor.
However the Cuban Oil boom is unlikely to happen any time soon and the biggest reasons are low oil prices and better prospects elsewhere.
Cuban oil industry has been long open to foreign investment; US sanctions denied it the best deep water drilling technology for extracting oil offshore. It is the biggest reason why Cuba produces a measly 55000 barrels of oil per day and one third of this is produced by just one company- a Canadian oil company named Sherritt International.
Cuba needs 155,000 barrels of oil per day and the gap is largely filled by its benign neighbor Venezuela under an agreement signed by its charismatic former Venezuelan President Hugo Chavez.
Venezuela at present ships 100,000 barrels of subsidized oil to Cuba daily and for this favor Venezuela receives the services of thousands of doctors, teachers and some military advisers. However falling oil prices have taken a big toll on Venezuelan revenue. High inflation, food shortages coupled with US sanctions for its human rights abuses has made the going difficult for Cuba’s ideological soul mate. It is only a matter of time before Venezuela will raise its hands.
Cynthia Arnson, director of the Latin American program at the Woodrow Wilson International Center said, “Given the economic disaster in Venezuela today any rational person dependent on Venezuelan financial support would have to be looking at other options.”