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Cuban oil exploration - the revolution digs deep/ FRFI 224 December 2011/January 2012

Fight Racism! Fight Imperialism! 224 December 2011/January 2012

‘I asked Che, if you think there’s oil in the Gulf, why don’t we go and investigate? He told me that we can’t because the technology doesn’t exist.’ Juan Valdes Gravalosa*

Today, the technology to which Che aspired is steaming across the oceans towards the northern coast of Cuba in the form of Scarabeo 9; a $750 million investment by the Cuban government in one of the world’s largest semi-submersible oil drilling rigs. Drilling on exploratory wells in the Gulf of Mexico will begin before the end of 2011.

In mid-November 2011, Rafael Tenreiro, head of exploration for the state-owned oil company Cubapetroleo, stated: ‘It is not a matter of if we have oil, it is a matter of when we are going to start producing.’ JOSEPH ESKOVITCHL reports.

Economic and social benefits for Cuba

The October 2008 announcement that Cuba had discovered significant offshore oil reserves in its ‘exclusive economic zone’ (EEZ) around the Gulf of Mexico alarmed the US establishment. The US Geological Survey estimates reserves of around 5 billion barrels and 9.8 trillion cubic feet of natural gas, However, Cuban sources place reserves closer to 20 billion barrels. In 2009, Cuba consumed 169,000 barrels of oil per day (bpd). With domestic production from existing oil wells at around 50,000 bpd, Cuba still relies on 120,000 bpd in imports.

Successful extraction of commercially-viable reserves, even at the lower end of the estimates, will make Cuba energy independent. If the higher estimates prove correct, Cuba will sit between China (20 billion barrels and 14th world ranking) and the US (19 billion, 15th world ranking) in terms of world reserves. In an era where oil and energy supplies become ever more crucial, the potential for the Cuban revolution to secure its future development and decisively break the crippling half-century blockade by US imperialism is increasingly realistic.

This does not mean, however, that a consumerist society, or the vast inequalities seen in many oil-exporting nations, will emerge in Cuba. The socialist process will ensure that future oil wealth is invested in social and economic development. Furthermore, Cuba’s welfare and developmentalist internationalism will extend these benefits throughout the oppressed world, especially in Latin America and the Caribbean through ALBA, the Bolivarian Alliance for the Americas.

A history of economic warfare

Depriving Cuba of access to oil has been a key tenet of the US blockade. In 1960, the US government pressured US and British oil refineries on the island to refuse to refine imported Soviet crude. The Cuban Revolution removed this obstacle by nationalising the refineries. The US responded by imposing the blockade. Cuba depended on Soviet oil imports. When the USSR collapsed in 1991, Cuba fell into economic crisis and political isolation. The Cold War was over, but the US tightened the noose further, using the Cuban Democracy Act (1992) and Helms-Burton Act (1996) to reinforce the blockade and penalise foreign companies dealing with Cuba, preventing them from operating in the US. Under the blockade, countries and companies are prohibited from selling goods to Cuba in which more than 10% of components are made or patented in the US. This raises the costs of trading with or investing in Cuba and puts off potential trade partners. Legislation introduced under the Bush administration, ‘Plan Bush’ 2004 and 2006, intensified efforts to prevent any funds or resources flowing into Cuba. Since 2009, the Obama administration has approved $20 million to be ‘invested’ in fostering counter-revolution. Cuba’s deep-sea oil exploration will increase the incentive for US imperialism to destroy the socialist revolution. Returning the island to its pre-revolutionary status as a semi-colony of the US would contribute to the US’s fuel security, offsetting instability and threats to its domination in other oil-exporting nations.

A 2006 World Security Institute report, Cuba, Oil and National Security, described the US blockade as ‘successful in relegating Cuba’s energy development schemes to less-than-world-class status’. While US engineering represents: ‘the leading edge of oil exploration technology...explicit in all of its foreign sales are export control stipulations that none of that technology can be sold or transferred to a short but well known list of countries: Iran, North Korea, until recently Libya, and of course, Cuba.’ The report recognises this as ‘technology denial’.

International co-operation undermines the US blockade

Despite the most sustained campaign of economic terrorism ever imposed by one country on another, the Cuban operation in the Gulf is testimony to its growing stature in the international arena and the bankruptcy of the US strategy of isolation.

The Scarabeo 9 is owned by Italian oil giant Saipem; it was designed with the aid of Norwegian engineers; built in the shipyards of Yantai, China; fitted with advanced technology in Singapore and has been initially contracted by the Spanish company Repsol. In line with blockade regulations, the huge rig, capable of prospecting to depths of 12,000 feet, contains less than 10% US-made parts. Cuba’s EEZ is divided into 59 blocks and agreements for exploratory wells have already been reached with state oil companies and conglomerates from China, Russia, Angola, Vietnam, Venezuela, Malaysia, Norway, Canada and India. Despite the punitive operating costs incurred as a result of the blockade, and political threats emanating from Washington and Florida, the economic and strategic advantages of trade with Cuba are clearly significant enough for the opprobrium of a crisis-ridden US to be weathered.

The Chinese National Offshore Oil Corporation (CNOOC) bid for Californian oil company Unocal in 2005 was withdrawn under pressure from the US establishment and its ‘national security’ concerns. Now, CNOOC will drill in five blocks at the western edge of Cuba’s EEZ within 100 miles of the Florida coast. Cuba has already strengthened its infrastructure and technology as part of Petrocaribe, a strategic alliance between Venezuela and Caribbean nations to promote regional socio-economic development based on the exploration, refining and distribution of oil. Venezuela’s state-owned oil company PDVSA invested $1 billion in a joint venture with CUPET, its Cuban equivalent, to repair, expand and build new refineries in Cienfuegos, Santiago de Cuba and Matanzas. The latter will refine crude oil extracted from the Gulf of Mexico waters and shipped from an upgraded super-tanker facility at the port of Matanzas. Cuba’s Mariel port is being developed with Brazilian capital to serve as the base of EEZ drilling operations. A Chinese company is to be the contractor for a $6 billion expansion of the refinery in Cienfuegos.

Pressure grows over US response

Splits are growing within the US ruling class over how to contend with Cuban developments. Between April and July 2010 the BP Deepwater Horizon disaster saw nearly five million barrels of oil gush into the Gulf of Mexico. In the wake of that disaster, as Robert Sandels points out ‘The US dilemma starts with the contradiction inherent in maintaining a blockade to destroy the same government which the United States now depends upon to help protect the Gulf and coastal states from another platform disaster’ (‘An Oil-Rich Cuba?’, Monthly Review, September 2011).

Growing numbers of environmentalists, anti-blockade groups and business interests are calling on the Obama administration to increase engagement and co-operation with the Cuban government. While in 2006 President Bush ordered Cubans attending a meeting with US oil executives on environmental issues to be ejected from a hotel in Mexico City, Cuban officials were invited to a conference in Florida during the BP disaster. The January 2011 report of the National Commission on the Deepwater Horizon spill called for negotiations between the US and Cuba, possibly brokered by Mexico, on regulatory oversight as well as containment and response strategies in the case of another spill.

Co-author of that report, William Reilly, former head of the US Environmental Protection Agency, was among a group of oil industry and environmental experts to receive licences from the Obama administration to travel to Cuba to discuss safety plans. He was impressed with Cuba’s awareness of the risks and knowledge of the latest international safety measures. This assessment has been unanimous. After visits in 2010 and 2011, Lee Hunt, president of the Texas-based International Association of Drilling Contractors, expressed confidence in the Cubans’ ability to drill.

The restrictions imposed by the US blockade mean that in the case of a spill from Cuban waters, the government would have to turn further afield for help with the resources and experience needed for a clean-up. ‘In the event of a disaster we are talking a response time in terms of equipment of four to six weeks as opposed to 36 or 48 hours. This is a serious impediment’, warned Hunt. Co-operation is vital to avoid such a crisis scenario.

Countering the calls for co-operation, the powerful Cuban-exile lobby

in Florida, a key swing state in next year’s presidential elections, calls for increased pressure to obstruct drilling operations in Cuban waters. Most recently, on 9 November 2011, Democrat Senator Bill Nelson introduced a bill which would allow claimants to sue foreign companies responsible for any oil spill without limit. The Financial Times’ John Paul Rathbone described this as ‘not so much an environmental measure. It’s more of a stick with which to beat Cuba – or rather, as the sponsors admit, to discourage companies from drilling for oil there’ (22 November 2011).

South Florida’s Republican representative to Congress, Illena Rohs-Lehtinen has introduced three ‘no-drill bills’ this year. These would impose punitive measures against Cuba’s foreign oil partners, including stripping executives of US visas and withholding US drilling concessions. An outspoken supporter of Cuban-exile terrorists, Rohs-Lehtinen is chair of the House of Representatives Committee on Foreign Affairs. Together with three other Cuban-American congressional representatives, she wrote a letter to Obama at the beginning of November 2011, stating: ‘we are extremely concerned over what seems to be a lack of a co-ordinated effort by the Administration to prevent a State Sponsor of Terrorism, just 90 miles from our shores, from engaging in risky deep sea oil drilling projects that will harm US interests.’

Spanish Repsol, the first company to lease the Scarabeo and the only private company involved which has significant commercial operations in the United States, has been pressurised and intimidated. Rohs-Lehtinen and a bipartisan group of 34 representatives wrote directly to Repsol’s chairman calling on him to ‘reassess the risks inherent in partnering with the Castro dictatorship, including the risk to its commercial interests with the United States’, warning that the company could face liability in US courts.

The Obama administration is also applying pressure on Repsol. In early June, the US Secretary of the Interior, Ken Salazar, leading a delegation of top US government officials, met with Repsol’s general director of exploration and Spain’s Industry Minister. A US State Department press release said the aim was ‘to engage industry and the international community in a dialogue on safe and responsible offshore oil and gas development’. In fact it was to warn Repsol over its partnership with Cuba. In response Repsol agreed to allow the US Coast Guard and the Bureau of Safety and Environmental Enforcement to inspect the Scarabeo rig. However, they also insist that the operation complies with all the unilateral US blockade legislation and will continue as planned. We can expect further pressure to be applied on Spain since the return of the conservative and historically anti-Cuban Popular Party in general elections on 21 November.

The US administration will be less able to assert pressure on state-owned companies, for example from the BRIC countries (Brazil, Russia, India and China), Venezuela and Vietnam. A growing exasperation can be sensed. At a hearing of the Senate Energy and Natural Resources Committee in October, Michael Bromwich, the director of the Interior Department’s Bureau of Safety and Environmental Enforcement, admitted that despite Repsol’s offers to co-operate, the US had no legal authority to inspect the rig once it begins drilling on site in Cuban waters. ‘It’s not optimal, Senator,’ he responded to a question from one Republican, ‘There’s no question that we can do a better and more full-bodied inspection once the rig is on site. But this is a lot better than nothing in our judgement, and we think it is the best way to protect US interests as best we can given the limitations’ (Energy Week, 24 October 2011).

How the tables have turned! And all the while, the Scarabeo continues steaming towards Cuba, and the socialist revolution prepares to dig deep.

* Cited by Helen Yaffe, Che Guevara: The Economics of Revolution, Palgrave Macmillan, 2009, p184.

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