Russia-Cuba Ties, What’s Ahead?

By PILAR MONTES

HAVANA TIMES, February 5 – Versions abound on the significance of the recently signed Strategic Partnership accord between Russia and Cuba. Although details have not been released in Cuba, the 34 agreements signed in recent days during Raul Castro’s trip to Moscow might give a hint as to what lies ahead.

The first visit by a Cuban president to Russia in 23 years does not mean, however, these nations had totally severed links that flourished during the 1960s, 70s and 80s, when Cuba was heavily dependent on trade with its chief supporter.

After the dissolution of the Soviet Union in 1991, Russia remained as one of the main importers of Cuban sugar and the island continued to buy Russian oil -although in much smaller quantities- and spare parts for vehicles and equipment that move many sectors of the Cuban economy.

The agreements signed by Presidents Castro and Medvedev include joint ventures and loans in the fields of energy, information technology, and biotechnology. Plans also call for a joint electronic scientific research center to develop electronics in Cuba.

The Russian media reported that the loans and aid to Cuba, agreed on January 30 between Dmitry Medvedev and Raul Castro, total US $354 million.

Deputy Finance Minister Sergei Shatalov said one government loan to Cuba amounting to $150 million is to purchase Russian agricultural and construction equipment to be repaid over nine years with a two year grace period. Another in the works will grant Cuba $100 million to lease Russian equipment.

A Vnesheconombank (VEB) export loan worth $47 million will allow Cuba to acquire a Tu-204SE cargo airliner for Cuba’s Aviaimport SA company. This will be the fourth such aircraft exported to Cuba in addition to three Il-96 passenger jets already delivered. This pre-export loan is a way of assisting Russia’s aircraft industry, said Andrei Mazurov, a VEB spokesman.

Shatalov also said that food donations for Cuba will total another $37 million, including 25,000 metric tons and 100,000 metric tons of grain ($7 million and $30 million, respectively). He said the first is ready for shipment.

The previous Russian loans allocated to Cuba under the 2006 agreements amounted to $335 million. According to Deputy Prime Minister Igor Sechin, who heads the Russian delegation on the intergovernmental commission, it has virtually all been spent.

A $20 million loan is being granted to repair and buy spare parts for old military equipment supplied during the Soviet era, said a Defense Ministry source. The Cuban military has kept what it could of those weapons operable, while at the same time developing its own newer equipment.

A report published on January 26 by the Moscow Times notes that a Gazprom-led consortium created last year to develop fields in Venezuela had signed a cooperation agreement with Cuba Petroleum. They will work together in exploration, production and refining, said Sechin. In addition to Gazprom, Russia’s largest oil and gas company, the consortium includes Rosneft, LUKoil, TNK-BP and Surgutneftegaz.

In another move that signals greater Russian investment in Cuba, Norilsk Nickel agreed on January 23 to fund exploration of ore reserves on the island with the prospect of mining them in the future. Likewise, carmaker AvtoVAZ signed a deal to organize the servicing of its vehicles in Cuba, these include the different Lada and Volga models as well as trucks. Another agreement includes a joint effort to develop vaccines.

Upgrading Cuba’s hydroelectric and thermoelectric plants will be another joint effort, between Russia’s Inter RAO EES Company and Cuba’s Union Electrica enterprise.

Trade between Russia and Cuba reached $400 million in 2008, about a third more than in 2007. Russia is currently Cuba’s fourth leading trading partner after Venezuela, China and Brazil.

As for the Cuban debt accumulated in the Soviet years, some Russian sources say this seems to be finally buried and forgotten, leaving a clean slate for this new stage in bilateral relations.

For Russia, the new strategic alliance means a revival of traditional links with Cuba, trade preferences and investment on the island which is still in need of Russian spare parts, with promising oil and nickel reserves which can also use Russian expertise. Also, Cuba can provide a springboard for Russian businesses to expand into Latin American and Caribbean markets.

Needless to say, for Cuba, it represents much-needed economic and political support for its socialist-oriented development process. In contrast with past times, the island is no longer deadweight, has opened to foreign investment and has much to offer Russia in the way of biotechnology, the pharmaceutical industry and joint ventures to introduce Russian products and services in Latin America and the Caribbean.

Finally, the strategic partnership agreement can strengthen both these countries’ stand before the new US administration of President Barack Obama. On the Russian side there is the issue of security with the anti-missile system that the US is deploying in Central Europe, showing that Russia is once again emerging as a world power.

For Cuba, talks with the new US administration are foreseeable, and there is the possibility of the US lifting some of the restrictions (travel and trade) imposed by the nearly half century economic blockade. A baby step towards a possible policy change was taken by Obama soon after his inauguration with the decision to close the detention facility at the US Guantanamo Naval Base. The new president has not addressed the larger issue of returning the occupied territory to Cuba.