July 27, 2008
How the Cuban Embargo Protects the Environment Offshore Drilling
By Mauricio Claver-Carone
The energy debate in the United States introduces one more powerful argument in support of current U.S. policy toward Cuba: environmental protection.
For years the Castro brothers have been courting foreign oil companies, and in recent years none have been courted more assiduously than China's Sinopec. Why Sinopec?
The answer is simple: If the Chinese were to start drilling in the Gulf of Mexico off the coast of Cuba - so very close to the coast of Florida - it would send a "red scare" through the halls of the U.S. Congress, creating a new and otherwise improbable coalition for unilaterally lifting the current embargo. Longtime advocates of lifting trade sanctions against Cuba would join with conservative Republicans, who, though they now support the trade embargo, are strong advocates for allowing U.S. companies to drill offshore, and with liberal environmentalists who would rather have strictly regulated U.S. companies drilling than unregulated Chinese companies. In Cuba that looks like a winning trifecta for changing U.S. policy.
As early as 2006, the Reuters news bureau in Cuba was reporting: "Havana is eager to see American oil companies join forces with the anti-embargo lobby led by U.S. farmers who have been selling food to Cuba for four years."
In recent weeks this strategy has taken center stage in Washington with political and public opinion leaders openly discussing the irony of "the Chinese drilling 60 miles from Florida's coast," while U.S. law prevents American companies from doing the same along the outer continental shelf.
The premise of the argument, however, is just not true. Chinese companies are not drilling in Cuba's offshore waters. Nor do the Chinese have any lease agreements with Cuba's state-owned oil company, Cupet, to do so. As a matter of fact, the last drilling for oil off Cuba's coast took place in 2004 and was led by the Spanish- Argentine consortium Repsol YPF. It found oil but not in any commercially viable quantity. Inactivity since suggests that Repsol YPF is not eager to follow up with the required investment in Castro's Cupet.
For almost a decade now, the Castro regime has been lauding offshore lease agreements. It has tried Norway's StatoilHydro, India's state-run Oil & Natural Gas Corporation, Malaysia's Petronas and Canada's Sherritt International. Yet, there is no current drilling activity off Cuba's coasts. The Cuban government has announced plans to drill, then followed with postponements in 2006, 2007 and this year.
Clearly, foreign oil companies anticipate political changes in Cuba and are trying to position themselves accordingly. It is equally clear they are encountering legal and logistical obstacles preventing oil and gas exploration and development. Among the impediments are well-founded reservations as to how any new discovery can be turned into product. Cuba has very limited refining capacity, and the U.S. embargo prevents sending Cuban crude oil to American refineries. Neither is it financially or logistically viable for partners of the current Cuban regime to undertake deep- water exploration without access to U.S. technology, which the embargo prohibits transferring to Cuba. The prohibitions exist for good reason. Fidel Castro expropriated U.S. oil company assets after taking control of Cuba and has never provided compensation.
Equally important, foreign companies trying to do business with Cuba still face a lot of expenses and political risks. If, or when, the Cuban regime decides again to expropriate the assets of these companies, there is no legal recourse in Cuba.
Frankly, it is bewildering why some seem to believe that U.S. companies partnering with one more anti-American dictatorship to explore and develop oil fields will somehow reduce fuel costs for American consumers and contribute to U.S. energy independence. One needs only to look at the reaction of the international oil markets when Hugo Chavez of Venezuela nationalized assets of U.S.-based ConocoPhillips and Chevron.
What message would the United States be sending to oil-rich, tyrannical regimes around the world about the consequences of expropriation if we were now to lift the embargo that was imposed after Fidel Castro expropriated the assets of Esso, Shell and Texaco?
For many years the U.S. embargo has served to protect America's national security interests; today it is also serving to prevent Cuba's regime from drilling near U.S. shores. And that's good for the environment.
Mauricio Claver-Carone is a director of the U.S.-Cuba Democracy PAC in Washington and formerly served as an attorney with the U.S. Treasury.
Originally published by The New York Times Media Group.
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