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The Economist : If Hugo goes

 



JUST when they were beginning to get used to the daunting prospect of life without Fidel Castro, Cubans are now being forced to consider another, even more daunting, possibility: life without Hugo Chávez. Venezuela's president may well make a full recovery from the cancer for which he was operated on in Havana last month, but he has been reminded that he is mortal. And he may not remain in power beyond a presidential election next year (see article ). Venezuela apart, nowhere would his departure from office be felt more strongly than in Cuba.

Mr Chávez subsidises Cuba to the tune of around $3.5 billion a year, by sending it an estimated 115,000 barrels of oil a day (around two-thirds of its consumption). Cuba pays in kind, in the form of 40,000 doctors, intelligence and security experts and other workers stationed in Venezuela. In addition, Mr Chávez is putting up money for infrastructure projects on the island, such as the expansion of an oil refinery at Cienfuegos. Venezuela is also Cuba's top trading partner.

Venezuelan aid has been the biggest single factor in helping the communist island emerge from the catastrophic slump that followed the demise of its previous sponsor, the Soviet Union, in 1991. Adult Cubans remember the early 1990s as a traumatic time of food and fuel shortages. Might such penury return?

Were Mr Chávez's opponents to take power in Venezuela, they would almost certainly cut aid to Cuba, not least since they face pressing needs at home. Cubans could expect widespread shortages. But things would not be quite as bad as in 1991. Then Cuba had become dependent on selling sugar to the Soviet Union at an inflated price. Now the economy is more diversified: the island is producing more oil; and tourism, nickel and remittances from Cuban-Americans have all become important sources of foreign exchange.

Raúl Castro, who succeeded his brother as Cuba's president in 2008, has shown signs of wanting to be less dependent on Venezuela. Whereas Fidel and Mr Chávez are close friends—the two were photographed talking, both dressed in convalescent tracksuits, after Mr Chávez's surgery—Raúl, a quiet and orderly man, seems ill at ease with the boisterous Bolivarian. In 2009 Raúl sacked Carlos Lage, Fidel's prime minister, who was particularly close to Mr Chávez (in 2005 Mr Lage had declared that “Cuba has two presidents, Fidel and Chávez”).

Cuba has recently sought investment from visiting delegations from China (which has offered a multi-billion-dollar credit line), Brazil and India. Raúl is trying to cut food imports by leasing land to private farmers. His other reforms, under which at least 221,000 licences for small businesses have been issued since October, may make the island more attractive for Cuban-Americans to visit or retire to.

But Cuba's main hope of economic independence is the Scarabeo 9, a $750m drilling rig built specially in China with no American parts (to avoid falling foul of the United States' economic embargo against the island). It is due in Cuban waters by the end of the year, contracted by Spain's Repsol to drill an exploratory well.

The United States Geological Survey, a government scientific body, reckons that the seas around Cuba hold 4.6 billion barrels of oil. But they lie under very deep waters. Repsol struck oil there in 2004, but decided extraction would not be profitable. Any new discovery would take years to exploit. If Raúl's reforms gather force, by then Cuba may be a rather different place.


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The Economist a leading weekly newspaper focusing on international politics and business news and opinion. Petroleumworld not necessarily share these views.

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Petroleumworld News 07/13/2011

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