In an unprecedented move, the United States has opened a new avenue within the intricate web of energy sanctions affecting Cuba and Venezuela.
The U.S. Department of the Treasury recently declared its intent to adopt a favorable stance towards specific license requests that would authorize the sale of Venezuelan oil to Cuba, with the condition that these transactions directly benefit the Cuban private sector, excluding state or military entities.
This development, confirmed by Reuters, was detailed in an official document released by the Office of Foreign Assets Control (OFAC) on February 25, under the "Venezuela Sanctions" section.
According to the agency, the Treasury emphasized a "favorable policy towards specific license requests seeking authorization for the resale of Venezuelan-origin oil for use in Cuba." This directive targets transactions aimed at supporting the Cuban populace, particularly the private sector, while excluding operations involving the Cuban military or governmental institutions.
Supporting the Cuban People
In response to FAQ 1238, the OFAC elaborated on the scope of this new policy, reflecting the U.S.'s commitment to supporting the Cuban people.
The document states that, in line with this support, OFAC will implement a favorable licensing policy for requests seeking authorization to resell Venezuelan-origin oil for Cuban use. To qualify, transactions must align with the terms of Venezuela General License 46A. Notably, applicants aren't required to have an established U.S. entity, and the restrictions in GL 46A concerning Cuba do not apply.
OFAC emphasizes that this policy focuses on transactions benefiting the Cuban populace, including the private sector (e.g., for commercial and humanitarian purposes in Cuba).
However, the limitations are clear. Transactions involving or benefiting any Cuban military-affiliated entity, intelligence services, or governmental institutions, particularly those on the U.S. State Department's Restricted List, are not covered by this favorable licensing policy.
The list includes numerous companies under the military conglomerate GAESA, underscoring the stringent exclusion of military-linked entities.
Venezuelan vs. American Oil Regulations
An essential distinction is made regarding oil origin: regulations concerning U.S.-origin oil exports are primarily managed by the Department of Commerce.
As a reminder, the U.S. Department of Commerce primarily oversees the export or re-export of U.S.-origin oil to Cuba, as well as all items subject to the Export Administration Regulations (EAR). Meanwhile, under the Treasury's rules, the Cuban Assets Control Regulations generally permit U.S. persons to engage in transactions incidental to the export of U.S. oil to Cuba, provided such export is authorized by the Department of Commerce.
This authorization applies to transactions covered by Commerce Department license exceptions, including the Support for the Cuban People (SCP) License Exception, which allows the export and re-export of gas and petroleum products to improve living conditions and support independent economic activity.
The OFAC summarizes that exports of U.S.-origin oil and other gas and oil products covered by the SCP License Exception do not require separate OFAC authorizations.
The agency also refers to FAQ 1226 for the definition of "Venezuelan-origin oil," which includes petroleum derivatives.
Political and Economic Implications
This announcement introduces a clear distinction within the sanctions regime by allowing energy operations that do not bolster Cuba's state and military structures, but rather support private or humanitarian activities.
In a nation where the state controls the energy system and fuel imports, the practical implementation of this policy will hinge on how operations are structured and who benefits.
The explicit exclusion of military-linked entities significantly limits the Cuban government's maneuvering space. Concurrently, the reference to the "Cuban private sector" emerges amid the expansion—albeit under tight restrictions—of micro, small, and medium-sized enterprises (MSMEs) on the island, many of which rely on fuel access to operate.
Washington's decision does not lift energy sanctions on Venezuela or Cuba but establishes a conditional channel that could allow Venezuelan oil to reach private actors in Cuba, contingent on specific licensing and U.S. oversight.
Understanding U.S. Policy on Cuban Oil Transactions
What is the significance of the U.S. allowing the resale of Venezuelan oil to Cuba's private sector?
This policy reflects a shift towards supporting the Cuban private sector, potentially boosting economic activities independent of state control, and aligning with U.S. goals of aiding the Cuban populace while maintaining pressure on the government.
How does this policy affect Cuba's energy sector?
The policy could diversify Cuba's energy sources and foster private enterprise growth, although its impact will depend on implementation and the exclusion of military-linked entities from benefiting.
What are the conditions for reselling Venezuelan oil to Cuba under this policy?
Transactions must benefit the Cuban people, particularly the private sector, and adhere to the terms of Venezuela General License 46A, without involving military or state entities.