Cuba has '15 to 20 days' of oil left as Trump turns the screws | FT #shorts

Key Concepts

• Oil Shortage: Cuba's critical lack of crude oil and fuel oil.
• Kepler: Energy consultancy providing data on oil shipments.
• US Sanctions: Executive orders and tariffs imposed by the US to restrict oil supply to Cuba.
• Fuel Oil: A specific type of petroleum product essential for power generation.
• USMCA (United States-Mexico-Canada Agreement): A pivotal free trade agreement influencing Mexico's foreign policy decisions.
• Rationing: The controlled distribution of a scarce resource, in this case, power.
• Regime Demise: The potential collapse or overthrow of the Cuban communist government.

Current Oil Crisis in Cuba

Cuba is facing a severe and immediate oil shortage, with energy consultancy Kepler reporting no oil shipments since January 9th. The island currently possesses only enough oil to last for an estimated 15 to 20 days. This critical situation has led to widespread and lengthy blackouts occurring almost daily across the island.

Geopolitical Pressures and Supplier Dynamics

1. Shifting Suppliers:

   • Mexico: Last year, Mexico became Cuba's largest oil supplier, surpassing Venezuela. The last shipment to Cuba, which arrived on January 9th, originated from Mexico. However, a subsequent planned shipment from Mexico has been shelved, at least temporarily.
   • Venezuela: Historically a major supplier, Venezuela's oil exports to Cuba ceased after the US captured Nicolas Maduro on January 3rd. Venezuela had also been Cuba's biggest supplier of fuel oil for power generation since mid-last year, but this supply has now stopped entirely.
   • Russia and Algeria: These nations have only provided sporadic oil supplies to Cuba over the last couple of years, failing to offer a consistent alternative.

2. US Sanctions and Pressure:

   • Donald Trump's Stance: The US President has exerted significant pressure, stating that "Cuba is really a nation that's very close to failing."
   • Executive Order and Tariffs: Trump further escalated measures by signing an executive order imposing tariffs on anyone who sells or otherwise provides oil to Cuba, effectively deterring potential suppliers.

3. Mexico's Dilemma:

   • Mexican President Claudia Shambam has adopted a cautious approach, refraining from ruling out a resumption of oil shipments to Cuba. However, such a move is considered "very tricky" in the short term.
   • USMCA Review: Mexico's reluctance stems from the need to maintain favorable relations with the US, particularly as a review of the pivotal free trade agreement with the US and Canada (USMCA) is scheduled for this year. This makes Mexico highly sensitive to US pressure.

Domestic Impact and Economic Consequences

Cuba's domestic oil production is insufficient to meet its demands, and the country heavily relies on imports, especially for fuel oil crucial for power generation. The cessation of fuel oil supplies from Venezuela has exacerbated the energy crisis, leading to the aforementioned daily blackouts. Beyond energy, Cuba's economy is already "crumbling," with tourist numbers experiencing a decline.

Future Outlook and Regime Stability

If no further oil shipments arrive, Cuba will be forced to implement drastic measures, including cutting back on refining operations and likely rationing power across the island. Analysts suggest that the severe oil shortage will "probably" hasten the demise of the communist regime. However, they caution against expectations of an immediate collapse, stating that "no one's betting on an immediate collapse."

Conclusion/Main Takeaways

Cuba is in the midst of a critical and immediate oil crisis, driven by a combination of US sanctions, the cessation of supplies from key partners like Venezuela, and the reluctance of other potential suppliers like Mexico due to geopolitical pressure. This shortage is already manifesting in daily blackouts and further economic decline. While the US aims to accelerate the collapse of the Cuban regime through these pressures, analysts predict a prolonged struggle rather than an immediate downfall, highlighting the complex interplay of international relations and domestic resilience.