Mexican oil shipments highlight Cuba's energy crisis

Cuba's energy crisis -one more aspect of the hardship the island is going through- required Mexico's oil aid in 2023. With the hydrocarbons normally sent by Venezuela and more sporadically by Russia not being enough, the Cuban regime asked Andres Manuel Lopez Obrador for financial aid . At the end of his term, López Obrador has turned to Cuba, with more than 3 million barrels of crude and derivatives, sent when Pemex's production continues to fall and its export revenues have decreased. Mexico has not clarified under what payment terms it delivered those shipments or whether it will continue with them through 2024 if Havana requests it.

Cuba's usual energy supply and generation problems were significantly increased in August 2022 with a fire in the fuel tanks at the Matanzas supertanker base. The fire raged for five days, with a final toll of 2 dead, 14 missing, more than 100 injured and more than 4,000 displaced due to the hundreds of homes that were affected. In addition to Cuban emergency teams, units from Mexico and Venezuela were also involved in extinguishing the fire.

The accident aggravated electrical failures and power outages that summer, since Cuba is one of the countries in the world that most uses liquid hydrocarbons for electricity production, accounting for 85% of the generation. Although government statistics indicate that 100% of the Cuban population has access to an electricity source capable of providing basic lighting and charging a cell phone or keeping a radio on for a minimum of four hours, the truth is that blackouts have been frequent for decades. These outages have increased with the energy crisis, to the point that in 2019 the government decided to implement an hourly rationing plan that remains in place to this day.

With hardly any hydrocarbons of its own -it extracts only about 40,000 barrels per day- and generally with little foreign currency, the Castro regime has always depended on the 'generosity' of friendly countries. Thus, between 1959 and 1989 Cuba relied on Russian oil subsidized by Moscow. When the USSR fell, the island entered a deep economic crisis, the "special period" of hardship that took place in the 1990s. Then Venezuelan oil began to arrive with Hugo Chavez: some 100,000 barrels per day at hardly any cost. But the crisis in Venezuela starting in 2015 again put Cuba on the lookout for other donors: Russia then moderately resumed its cooperation, remitting some supplies; now Mexico has had to join in. Havana assures that it has already overcome the exceptional status lack of electricity generation, but some new blackouts speak of an unresolved deficient infrastructure.

Venezuela and Russia

Since the summer of 2022, when the Matanzas fire broke out, Russia has starred in frequent shipments, such as the vessel 'Kazan', with an estimated cargo of 700,000 barrels, and the tanker 'Transsib Bridge', with 300,000 barrels of diesel, which arrived in Cuba in September 2022, or the supercargo ship 'Limo', which in May 2023 transferred 800,000 barrels. In June 2023, Havana and Moscow reached an agreement whereby Cuba would receive an annual agreement agreement whereby Cuba would receive annually from Rosneft 1.64 million tons of crude oil and derivatives, which could mean a average of 32,000 barrels per day, depending on the quality of the fuel.

The agreement with Russia sought to compensate the lower shipments that Venezuela was making: in September 2023 the Venezuelan supply would reach a ceiling of 86,000 barrels per day, but the year started in January with 40,000 barrels per day and reached a minimum of 32,000 barrels per day in October. As Jorge Piñon researcher of the University of Texas points out, Cuba needs about 140,000 barrels per day to satisfy its demand, so given its leave production it needs to import about 100,000 barrels per day.

It is expected that thanks to the new licenses first granted by the United States so that Chevron could operate with Pdvsa and the easing of sanctions later decided by Washington, which also free operations of Repsol and Eni, Venezuela will be able to increase its shipments of crude oil, fuel oil, diesel and gasoline. In any case, sometimes the Cuban regime sells part of the Venezuelan oil it receives (it is a business, since it sells it at market price when in fact it has obtained it at no cost). Thus, given the storage difficulties experienced by Cuba after the Matanzas fire, it is possible that Cuba resold some Venezuelan shipments that arrived before mid-2023 because of the need to make room for the 800,000 barrels of high quality Russian crude that were about to be delivered, according to Jorge Pinón.

Mexico

Shipments from Mexico have been on record since March 2023, although the Mexican government has provided little information in this regard. The tracking of oil tankers departing from Pemex facilities and arriving in Cuba suggests the submission of at least 3.2 million barrels of oil and derivatives over the past year. The first shipments totaled 2.81 million barrels; in September there was a Pemex shipment to the port of Cienfuegos using the Cuban tanker 'Vilma', which transported 350,000 thousand barrels from Veracruz to the island; in December, 54,755 barrels of crude oil arrived from the Mexican port of Coatzacoalcos aboard the ship 'La Esperanza'.

These operations were controversial for two reasons: on the one hand, the lack of transparency on the part of the López Obrador government, which did not refer to these shipments until they were revealed by the media and still does not clarify what payment it receives in exchange for them; on the other hand, the possible violation of the sanctions that the United States maintained until the end of last year on the activity of the Venezuelan oil sector.

Regarding this last aspect, some initial versions indicated that the Mexican supply had annoyed the United States and that as punishment Washington had cancelled a loan of 800 million dollars that the US public export-import bank, Eximbank, had C granted to Pemex. However, the director general of Pemex, Octavio Romero Oropeza, immediately assured that the loan was not granted because in the end the business had decided not to request it; the same was ratified by Eximbank, which also denied that the Pemex shipments contravened the provisions of the United States, since "the humanitarian financial aid to Cuba is not considered a violation of the US sanctions", so that it would not have prevented the granting of the credit if it had finally been requested.

Regarding Cuba's payment for the oil received from Pemex, there has been doubt as to whether the barrels delivered constituted a donation to the Cuban regime, or whether the Mexican company really expected a retribution from the Díaz-Canel government. López Obrador's government has not clarified whether these barrels are long-term sales with credit or part of a bilateral foreign cooperation agreement between Mexico and the island. In any case, the Mexican president has denied that the shipments were donations, and seemed to link it to a exchange of favors -oil in exchange for the Cuban doctors present in Mexico-, in terms similar to what happens between Venezuela and Cuba: "If they tell us: 'Sell us [sic] oil because we do not have how to acquire it', of course they do. When we ask them: 'Help us because we don't have specialist doctors...' Even, when the pandemic broke out, doctors came and Cuban specialist doctors are working in our country, and we are very grateful to them". 

Pemex's production and financial status actually advises little waste. Pemex's own liquid hydrocarbon production fell in 2023 to 1.57 million barrels per day from average (with December still to be computed), down from 1.66 million in 2022 and 1.8 million in 2018, continuing a decline that deepens each year. Crude oil export revenues in 2023 are estimated to have fallen below those of 2022.

But López Obrador's operation is political. The Mexican president, who will conclude his six-year term at the end of 2024, has been increasing his relations with the Díaz-Canel government. Apart from oil shipments, he has encouraged financial aid to the island with donations of agricultural subject such as the 'Sembrando Vida' program. Cuba has also been one of the few countries that López Obrador, a leader who unusually refuses to travel abroad, has visited as president.