Economy

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.

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!

Spencer Tunick Nude Installation in Israel

Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

👋 Salam!*

Welcome to Monday, where the UK pays homage to slain MP David Amess, Myanmar frees thousands of prisoners, and Facebook gets ready to build its "metaverse." Please fasten your seatbelts: Worldcrunch also takes stock of the long-lasting effects — good and bad — the pandemic has had on the air travel industry.

[*Azeri - Azerbaijan]

🌎  7 THINGS TO KNOW RIGHT NOW

Myanmar to free political prisoners: Myanmar's junta chief Min Aung Hlaing has announced the release of 5,636 prisoners who had been jailed for protesting the coup that ousted the civilian government in February 2021.

• Powerful Haiti gang behind the kidnapping of U.S. missionaries: The notorious 400 Mawozo gang is believed to be behind the kidnapping in Haiti of a group of Christian missionaries, including 16 U.S. citizens and one Canadian. The brazen kidnapping on Saturday comes as crime is spiking since the killing of President Jovenel Moise in July.

• UK to pay tribute to David Amess: British lawmakers will pay homage in parliament to colleague David Amess, who was stabbed to death Friday in what was described by the police as a "terrorist incident." Officers arrested a 25-year-old suspect whose father, Harbi Ali Kullane, worked as a media adviser to a former prime minister of Somalia.

• COVID update: Russia has registered more than 34,000 cases of new infections in the past 24 hours, a new record since the start of the pandemic. Meanwhile, police in the northeast Italian city of Trieste used water cannons to clear striking dockworkers protesting Italy's new requirements that all employees be vaccinated.

• At least 26 killed in floods in India: Torrential rain has triggered floods and landslides in India's southern coastal state of Kerala, killing at least 26 people.

• Facebook to hire 10,000 in EU to develop "metaverse": The U.S. social media giant plans to hire 10,000 workers in the European Union over the next five years to build a "metaverse," a virtual reality version of the internet that the company touts as the future.

Punishing parents for children's bad behavior: After limiting gaming hours for minors, China is now considering legislation to reprimand parents if their children exhibit "very bad behavior" or commit crimes.

🗞️  FRONT PAGE

Colombian daily El Espectador dedicates its front page to Alex Saab, "owner of the secrets" of Venezuelan President Nicolas Maduro. The Colombian businessman, wanted by U.S. authorities for allegedly laundering money on behalf of Venezuela's government, has been extradited from Cape Verde to the U.S. where he is scheduled to appear in court today.

#️⃣  BY THE NUMBERS

4.9%

China's economy registered its slowest pace in a year as the country faces a looming energy crisis with power shortages and increasing pressure on its property sector. Gross Domestic Product (GDP) for the period between July-September rose 4.9%, the weakest numbers since the third quarter of 2020 and significantly lower than forecasts. The world's second-largest economy faces a debt crisis linked to the China Evergrande Group debt crisis, while energy shortfalls have dropped factory output to its weakest since early 2020, when heavy COVID-19 curbs were in place.

📰  STORY OF THE DAY

7 ways the pandemic may change the airline industry for good

Will flying be greener? More comfortable? Less frequent? As the world eyes a post-COVID reality, we look at ways the airline industry has been changing through a pandemic that has devastated air travel.

⛽ Cleaner aviation fuel: With air travel responsible for roughly 12% of all CO2 emissions from transport, and stricter international regulation on the horizon, the industry is increasingly seeking sustainable alternatives to petroleum-based fuel. In Germany, state broadcaster Deutsche Welle reports that the world's first factory producing CO2-neutral kerosene recently started operations in the town of Wertle, in Lower Saxony. The plant, for which Lufthansa is set to become the pilot customer, will produce CO2-neutral kerosene through a circular production cycle incorporating sustainable and green energy sources and raw materials

.🛃 Smoother check-in: The pandemic has also accelerated the shift towards contactless traveling, with more airports harnessing the power of biometrics — such as facial recognition or fever screening — to reduce touchpoints and human contact. Similar technology can also be used to more efficiently scan physical objects, such as explosive detection. Ultimately, passengers will be able to "check-in" and go through a security screening anywhere at the airports, removing queues and bottlenecks.

✈️ The billion-dollar question: Will we fly less? At the end of the day, even with all these (mostly positive) changes that we've seen take shape over the past 18 months, the industry faces major uncertainty about whether air travel will ever return to the pre-COVID levels. Not only are people wary about being in crowded and closed airplanes, but the worth of long-distance business travel, in particular, is being questioned as many have seen that meetings can function remotely, via Zoom and other online apps.


➡️ Read more on Worldcrunch.com

📣 VERBATIM

"The crimes committed that night are unforgivable for the Republic."

— Emmanuel Macron became the first French president to commemorate the killing of as many as 200 Algerian independence protesters by Parisian police in 1961. For 40 years, French officials ignored the massacre, which took place a year before Algeria gained its independence from France after an eight-year war. In 2012, French President François Hollande acknowledged the killings for the first time on a visit to Algeria, and Macron took it further by attending Sunday's commemoration at the site where the events happened in the French capital. Still, many had hoped the French President would go further and take responsibility for a "state massacre," for a crime many historians consider the most violent repression of a peaceful demonstration in post-War Europe.

📈💥  IN OTHER NEWS

​Low trust, high risk: The global rise of violence targeting politicians

The deadly stabbing of British Parliament Member David Amess confirms an ongoing study on trust and governance in democracies around the world: It's bad. In The Conversation, James Weinberg — the study's author and a lecturer in Political Behavior at the University of Sheffield — writes:

⏪ The assassination of Amess, who was stabbed to death in his constituency on Friday, is a tragic moment for democracy. What makes it even more devastating is that such a catastrophic failure is not without precedent or predictability. Labour MP Jo Cox was shot at her constituency surgery in 2016. Before her, another Labour MP, Stephen Timms, survived a stabbing in 2010. And Andrew Pennington, a Gloucestershire county councilor, died in a frenzied attack in 2001 while trying to protect local Liberal Democrat MP Nigel Jones.

☝️ Beyond these critical junctures in the public debate about politicians' safety, elected representatives must live with an increasingly insidious level of popular cynicism that threatens violence on an almost daily basis.

🇬🇧🇳🇿🇿🇦 Not only are these experiences of abuse or threats of physical violence felt across both sides of the political aisle in the UK — they also appear to be growing more common in other democratic contexts where the climate of politics has been presumed to be both calmer and more volatile, from New Zealand to South Africa.


Read the full piece from The Conversation, now on Worldcrunch.com

✍️ Newsletter by Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!
THE LATEST
FOCUS
TRENDING TOPICS
MOST READ