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Cuba

Why Is Russia Writing Off Billions Of Cuba's Debt?

It's more about secret oil reserves than Cold War nostalgia.

Havana's "Recova" in front of the Capitolio
Havana's "Recova" in front of the Capitolio
Dimitri Butrin

HAVANA - No one was expecting groundbreaking developments from Dmitry Medvedev’s less-than-24-hour visit to Havana last week.

But on the evening of Feb. 21, Medvedev quietly joined Raul Castro and other representatives of the Cuban government at the Palace of the Revolution to sign a major debt-restructuring agreement. Medvedev also met with Fidel Castro, who remains at the center of Cuban politics.

The debt-restructuring plan relates to outstanding bills incurred by Cuba during the time of the Soviet Union, which Russia at least theoretically has the rights to collect on. There is no official sum given for the amount of debt involved: Russia says that the total debt amount owed by Cuba is more than $30 billion, but during negotiations between Russia and Cuba related to the debt in 2008, both sides generally were discussing between $20 billion and $22 billion. The official amount of foreign debt that Cuba has recognized – but not serviced since 1987 – is $11 billion.

Cuba holds the largest Soviet-era debts, and countries with smaller debts, such as Afghanistan and Iraq, have already restructured their debts with Russia.

But Cuba’s unrecognized debts to Russia have hindered Cuba’s international trade for several years. It has impeded Cuban efforts to restructure its debt with other countries and given it credit problems, worsening the effects of the U.S. trade embargo on Cuba.

The change in status for the lion’s share of Cuba’s international debt – if it is not accompanied by a stricter sanctions from the U.S. – will allow Cuba to re-enter the international lending market, although in a somewhat limited capacity. That gives economic liberalization a chance at spreading throughout Cuba.

The terms of the debt restructuring are still unknown, and both sides seem intent on keeping it a secret. But in other cases where Russia has agreed to restructure Soviet-era debt, the deal has involved writing off between 90% and 95% of the debt. So it is unlikely that Cuba will end up owing more than $3 billion.

Ulterior motives?

There are several theories circulating among experts, however. One is that “opening” the relationship with Cuba is a type of insurance against changes in Venezuela. Another theory is that the interest in working with Cuba could be related to attempts to find oil off the Cuban coast.

Since 2008 there have been discussions about the possibility of a large offshore oil deposit near the northern coast of Cuba. Venezuelan company PdVSA, the Malaysian Petronas, Russian Zarubezhneft and the Spanish Repsol have explored the area and decided, in 2012, that there was no commercially usable oil. But in December Zarubezhneft started a second round of explorations in a deeper area. The second round of tests will wrap up in June, but the results could theoretically be available already.

If Zarubezhneft does find oil, it is entitled to sign an agreement with the Cuban state-owned oil company, Siret, to share exploitation of the deposits from now until 2034. Zarubezhneft did not comment on the issue. Local sources said there was no news on the second round of explorations. Regardless, Russia’s rush to complete the debt-restructuring process by Sept. 2013 could be related to the possibility of major oil reserves in Cuban coastal waters.

Regardless of the oil situation, Russia is trying to restore active trade with Cuba. The Federal Customs Service has already signed agreements with Cuba on information sharing and preferential tariffs. Cuba has also signed several contracts to purchase Russian airplanes. Hardly a return to the Cold War bustle between the two countries, but it was time to get back to business.

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Geopolitics

Capitol Riot, Brazil Style? The Specter Of Violence If Bolsonaro Loses The Presidency

Brazilian politics has a long history tainted with violence. As President Jair Bolsonaro threatens to not accept the results if he loses his reelection bid Sunday, the country could explode in ways similar to, or even worse, than the Jan. 6 assault on the U.S. Capitol after Donald Trump refused to accept his defeat.

Supporters of Brazil presidential candidates Bolsonaro and Lula cross the streets of Brasilia with banners ahead of the first round of the elections on Oct. 2.

Angela Alonso

-Analysis-

SÂO PAULO — Brazilian president Jair Bolsonaro delivered a message to his nation this year on the anniversary of its independence day, September 7. He recalled what he saw as the nation’s good times, and bad, and declared: “Now, 2022, history may repeat itself. Good has always triumphed over evil. We are here because we believe in our people and our people believe in God.”

It was a moment that’s typical of how this president seeks to challenge the democratic rules. Bolsonaro has been seen as part of a new populist global wave. Ahead of Sunday's first round of voting, the sitting president is trailing in the polls, and former president Luiz Inácio Lula da Silva could even tally more than 50% to win the race outright and avoid an Oct. 30 runoff. Bolsonaro has said he might not accept the results of the race, which could spark violence from his supporters.

However, Brazil has a tradition of political violence. There is a national myth that the political elite prefer negotiation and avoid armed conflicts. Facts do not support the myth. If it did all major political change would have been peaceful: there would have been no independence war in 1822, no civil war in 1889 (when the republic replaced the monarchy) and, even the military coup, in 1964, would have been bloodless.

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