Embargo or Blockade?

An embargo is when one nation establishes a policy not to trade with another nation; it is the prerogative of any nation. A blockade is when a country uses a military threat or force to close the borders of another entity to international commerce, preventing normal commercial activity with third parties. A blockade is an act of war. The cumulative effect of US sanctions on Cuba is to impede the island’s commerce with the citizens and companies of other states through financial, legal, and political mechanisms.

Indeed, during the first six years of Barack Obama’s presidency, a record-breaking fifty-six fines were imposed on foreign entities engaging with Cuba, amounting to nearly $14.3 billion, with a further $2.8 billion in fines imposed even after rapprochement with Cuba was announced by the administration in December 2014. European banks fined for transacting with Cuba (among other sanctioned countries) include ING ($619 million), BNP Paribas ($8.9 billion), Commerzbank ($718 million), Credit Suisse ($536 million), and the Royal Bank of Scotland ($100 million). Banks around the world now list Cuba among the countries with which they will not transact. Blocking bank payments prevents trade in goods and services, remittances, and donations. The United States also applies political pressure on governments, pressing states to reject Cuban medical assistance, even recently during the COVID-19 pandemic, according to Cuban officials.

Clearly, therefore, the United States is imposing a blockade on Cuba.

A History of Incremental Sanctions

In July 1960, three months after Mallory’s memorandum, President Dwight D. Eisenhower used the Export Control Act of 1949 to cut Cuban sugar exports to the United States, purportedly in response to the nationalizations of sugar on the island. Cuba responded with further nationalizations of US businesses, whose owners were instructed by the US government to reject Cuban offers of compensation. This was intended to devastate the Cuban economy, given the island’s dependence on sugar exports to the United States. The USSR stepped in to purchase the sugar dropped by the United States. The successive tit-for-tat retaliations between the Cuban and US governments culminated in the United States breaking off diplomatic relations on January 3 1961.

The US blockade has subsequently been enforced through six main statutes:

• 1917 Trading with the Enemy Act (TWEA), section 5(b): Prohibits, limits, or regulates trade and financial transactions, including those related to travel, transport or business, in times of war or when a national emergency has been declared.
• 1961 Foreign Assistance Act, section 620(a): Prohibits assistance to the Cuban government and countries assisting Cuba, thus already endowing US sanctions with an extraterritorial character. It authorized the president to establish a total embargo on Cuba, which Kennedy did on February 3, 1962.
• 1963 Cuban Assets Control Regulations, under section 5(b) of the TWEA: Cuban assets in the United States were frozen, all financial and commercial transactions were prohibited unless approved by permit. Direct and indirect export of US products, services, and technology to Cuba were prohibited, as were Cuban exports to the United States and transactions in US dollars in Cuba by citizens of any country. Penalties were imposed for violations by the US Treasury’s Office of Foreign Assets Control (OFAC).

By exploiting the island’s economic dependence on the United States for trade, investment, and loans, those early sanctions might have brought the Cuban Revolution to its knees. The US dollar had been established as the basis for international trade in 1944, giving the country huge leverage over international trade. The Soviet Union’s decision to assist the Cubans in 1960 threw them a lifeline. While Cuba’s trade with the USSR was sometimes problematic, it was decisive for the survival of the Cuban revolution, cushioning the impact of US sanctions.

That ended, however, after the collapse of the USSR, which generated a severe economic crisis. Cuba lost 87 percent of its trade and investment, and GDP nosedived by a third in three years. The story of how Cuba’s socialist system survived the “Special Period” of economic crisis is told elsewhere.

The Cuban economy was restructured for reintegration into a capitalist world market operating under neoliberalism and dominated by its nemesis, the United States. The Cubans demonstrated remarkable resilience and creativity, even while opponents in the United States sought their ruin through new sanctions:

• 1992 Cuban Democracy (Torricelli) Act: Prohibited foreign-based subsidiaries of US companies in third countries from trading with Cuba or Cuban nationals, banned foreign ships docking in Cuba from entering US ports for six months, barred travel to Cuba by US citizens, and limited family remittances to the island. It denied foreign assistance and debt relief to countries aiding Cuba, effectively confirming the status of sanctions as a blockade, not an embargo. It stipulated that medical goods could be exported to Cuba only with presidential authorization following “on-site inspections” to verify the use and beneficiaries of the medical items. It added that “food, medicine, and medical supplies for humanitarian purposes” were only allowed when Cuba takes steps to introduce what the US president deems are free and fair elections for a new government.
• 1996 Cuban Liberty and Democratic Solidarity (Helms-Burton) Act: Strengthened the extraterritorial impact of sanctions, threatening entities and individuals in third countries with legal action and denial of entry into the United States for “trafficking” in nationalized properties. It planned the transition government in a post-Castro era, with an explicitly capitalist economy, and codified the US blockade into law so that the US President would be unable to end it without legislation.
• 2000 Trade Sanctions Reform and Export Enhancement Act: Authorized the sale of agricultural goods and medicines to Cuba for humanitarian reasons. However, it did not override the Torricelli Act stipulations about presidential authorization and on-site verifications. Regulations in 2005 added that Cuba must pay for goods in full, in cash, before shipment. The act also limited travel to Cuba by US citizens to twelve authorized categories requiring a license.

Other regulations have been applied over the years, modifying and extending existing provisions. For example, third-country manufacturers cannot export to Cuba any goods containing 20 percent US components and must request a license for goods with up to 10 percent US components. The result is a complex web of overlapping legislation that is almost impossible to navigate. These sanctions have targeted key economic and strategic areas of development in Cuba: sugar and nickel exports, tourism, hydrocarbons, and infrastructure projects as well as, more recently, biotechnology.

Republican or Democrat?

The Republicans and Democrats have each tightened the screws equally on Cuba. We see this in the implementation of sanctions and OFAC fines that continued into the new millennium.

Analysis by Cuban scholars Ernesto Domínguez López and Seida Barrera Rodríguez reveals that between 2001 and 2020, US sanctions legislation was applied 121 times against Cuba, largely as a political tool to mobilize, award, or compensate key electoral sectors, particularly the Cuban exile community in Florida, which is a decisive state in US presidential races. President George W. Bush’s administration imposed 4.75 sanctions per year; Obama’s administration 6.38 per year; then the rate soared to 10.67 during Donald Trump’s first three years. Sanctions have been accompanied by renewed pressure for regime change with sophisticated and multifaceted plans, from Bill Clinton’s “people to people” programs, to Bush’s Plan for a Free Cuba, to Obama’s “civil society engagement.” Since the late 2000s, a $20 million annual budget has been openly allocated for these so-called democracy promotion programs.

In 2015, Obama restored diplomatic relations with Cuba. Embassies were opened, Cuba was removed from the list of state sponsors of terrorism, bilateral commissions were set up, regular flights and postal services were restored after decades, and restrictions on US citizens’ travel to the island were eased. In his final days, Obama eliminated the “wet foot, dry foot” policy to encourage emigration from Cuba. However, commercial and economic progress was minimal. In September of 2015 and 2016, Obama signed annual extensions on the Trading with the Enemy Act (TWEA) against Cuba, now the only country restricted by TWEA.

His administration took small strategic steps to “engage” Cuba by signing executive orders to bypass Congress. They introduced five packets of measures and granted licenses to a handful of US companies to trade with and operate in Cuba. However, international banks remained terrified of fines being imposed while Cuba remained on the list of countries under US sanctions. Effectively, Cuba still could not use the dollar in the international economy nor make deposits in international banks. Cuban goods still could not be exported to the United States.

From 2017, President Trump’s administration reversed rapprochement and ratcheted up hostility, culminating in 243 new actions, sanctions, and coercive measures against Cuba, generating a new energy crisis and scarcity of basic goods (fuel, food, and medicines) that replicated the severe economic crisis of the 1990s. The cost of finding unplanned, unbudgeted replacement sources put terrible strain on the already weakened Cuban economy. The government used its control over distribution to ration goods rather than leave it to survival of the fittest under the market mechanism. Rising at dawn to join queues has become part of the daily grind for Cubans.

Over fifty of the Trump measures were introduced during the pandemic, as Cuba struggled to import medical ventilators, PPE, syringes, and oxygen tanks for its COVID-19 response. Shrinking resources were channeled into its public health mobilization. To protect the population, Cuba closed its borders at the start of the pandemic, leading to a 70 percent fall in tourism and a huge loss in revenue. It ended 2020 with an 11 percent fall in GDP. Unlike most countries, Cuba has no lender of last resort and no emergency funding to help it through crises.

In an act of vindictiveness, Trump returned Cuba to the list of state sponsors of terrorism just days before leaving office, immediately qualifying Cuba as “high risk” for international banks and investors. Few international banks will now transact with Cuba for fear of OFAC fines. This hugely complicates normal commerce; even humanitarian donations are obstructed. Reneging on his campaign promise to reverse these measures, President Biden has added sanctions of his own.

Sanctions on Russia

Cuba will be hit by rising global prices of oil and essential foodstuffs resulting from sanctions on Russia, as will the rest of the world. It will also be impacted in specific ways:

• Russian financial institutions facilitate payments to Cuba, including by third countries. These will now be blocked.
• Cuban and Venezuelan trade in oil and other services may be obstructed, because, in 2019, Venezuelan oil company PDVSA moved its administrative functions from Portugal to Russia to evade US sanctions.
• Development plans agreed on between Russia and Cuba may now be halted, including upgrades to Cuba’s railway system, a steel plant, oil production facilities, thermal power plants, and airline fleet.
• The abrupt end of Russian tourism. As a direct result of sanctions, Russian airlines have stopped flying to Cuba and ticket sales have been suspended. In 2021, Russia became the principal source of tourism to Cuba, and Russians were expected to make up 20 percent of all visitors in 2022. The tourism sector is vital for the island’s post-COVID recovery.

Sanctions as War

The United States currently has sanctions programs targeting over twenty countries. In 2019, 88 percent of international transactions involved US dollars, giving the United States extraordinary power over global trade. By 2018, the National Association of Cuban Economists calculated the cost of the blockade to be $4.4 billion annually, equivalent to $12 million every day. Cuba estimates a cumulative total cost of over $144 billion over six decades.

International bodies have documented the high cost in terms of human suffering, which, along with their exterritorial character, puts US sanctions on Cuba in violation of international treaties and conventions. US and UK sanctions on Iraq killed half a million children in the 1990s, more than 150 a day. That this level of devastation has not been evident in Cuba has enabled some commentators to downplay their significance. In 1997, the American Association for World Health concluded, “A humanitarian catastrophe has been averted only because the Cuban government has maintained a high level of budgetary support for a health care system designed to deliver primary and preventative health care to all of its citizens.” In other words, the socialist state has used its welfare-based, centrally planned economy to protect the population.

In June 2021, the UN General Assembly voted, for the twenty-ninth consecutive year, to end the US blockade of Cuba; 184 countries supported the Cuban motion with just the United States and Israel opposing. Beyond this annual vote, Britain, the European Union, Canada, and other countries have “blocking” legislation that protects their own entities and citizens from the United States’ Cuba sanctions. However, they have failed to implement that legislation for fear of incurring the wrath of the United States and OFAC fines. It is up to citizens in those countries to insist that they do. It is more urgent than ever to end the US blockade and finally give Cubans the chance to prosper, not just survive.