August 1st, 2007
The value of Venezuelan oil subsidies to Cuba climbed past $3 billion in 2006 and could swell to $4 billion this year -- almost double current estimates, according to a new University of Miami report to be released today.
Venezuela is propping up Cuba's troubled economy with shipments of 94,103 barrels of oil a day, experts at UM's Institute for Cuban and Cuban American Studies (ICCAS) calculated, based on official Havana figures issued last week.
That means Cuba last year got about $3.3 billion in oil products from Venezuela, up from $2.7 billion in 2005. Caracas has declined to explain the payment system, but experts think Havana gets the energy assistance free of charge.
As Cuban leader Fidel Castro begins his second year out of office and in the hospital, Cuba's reliance on Venezuela to keep the lights on and vehicles rolling has not waned.
Experts say the high subsidies are reminiscent of Cuba's dependency on the Soviet Union, which before its collapse provided an estimated $4 billion to $6 billion a year in subsidies to Cuba. Cuba's economy fell apart, and widespread shortages plagued the nation for years.
''Cuba is repeating chapter and verse what it did in the '70s and '80s with Russia,'' said ICCAS energy expert Jorge Piñón, who prepared the study. 'If Chávez gets hit by a truck crossing the street tomorrow, the (Venezuelan oil officials) ... are going to say to Cuba: `Pay for it, and pay market price.' ''
Cuba's close relationship with Venezuela grew along with President Hugo Chávez's hold on power. As Chávez defeated efforts to topple him, he increased oil shipments to Cuba and solidified his bond with Castro.
The two remain close friends, and Chávez is one of the few people who visited Castro during the height of his illness last year.
Initially, Cuba was reported to be paying for the Venezuelan oil by sending Cuban medical personnel to work in poor Venezuelan neighborhoods. But experts who study the deal say Venezuela now pays Cuba for the medical services -- and therefore is still providing the oil for free.
The arrangement has been widely criticized by Chávez opponents, who say the contract with Cuba has never been made public. Piñón argues that the losses to Venezuela are significant, particularly if the state-owned PDVSA oil company wanted to sell that oil on the international market instead.
But for Chávez, the deal helps enhance his international image as socialist heir apparent to Castro because of continuing high oil prices, Piñón said.
''Is it hurting Chávez in the pocket?'' Piñón said. ``As long as the price remains as it is today, he can afford it.''
Julia Sweig, senior fellow at the Council on Foreign Relations in Washington, agreed: Chávez would rather have the worldwide caché.
''It's small potatoes for Chávez to spend a few billion dollars for that,'' she said. ``I don't think it hurts him. It enhances his panache.''
If the $4 billion estimate for 2007 proves true, she said it is a momentous figure.
''Four billion is a psychologically important number -- it's the value of the Soviet subsidies right before they were cut,'' Sweig said. ``It's got real resonance. It shows Venezuela is the new partner, the new insurance policy, the new Mac Daddy.''