Washington’s newest Cuba problem

By Risa Grais-Targow

Cuba. Oil. Two words that tend to get U.S. politicians hot under the collar, though usually not in the same sentence. That could change as the 2012 campaign season heats up in the U.S. and as Cuba’s plans for offshore oil exploration materialize. The Chinese-built, Italian-owned Scarabeo 9 rig is scheduled to enter Cuban waters in August or September, and a consortium of international oil companies is set to begin drilling soon after. The struggling island nation, which currently depends on generous oil deals from its friend and neighbor Venezuela, has high hopes that its potential offshore resources might rev up its sagging economy. (Cuba claims that it has 20 billion barrels of "probable" oil in the continental shelf just off Havana, while the U.S. Geological Survey thinks that number is closer to 5 billion barrels.) But as the rig makes its steady way from Singapore, officials in Washington are getting anxious. Many lawmakers doubt that Cuba has the regulatory capacity or expertise to drill safely, particularly without the U.S.-manufactured equipment that the more than 50-year-old embargo has kept out of Cuban hands. And with BP’s spill in the Gulf of Mexico still fresh in the U.S. public’s mind, politicians are flagging the possibility of a Macondo-like spill 50 miles off the Florida coast.

The specter of such a disaster has already prompted several legislative efforts to punish foreign firms that drill in Cuba — or at least those who chose not to comply with U.S. safety standards. Since January, Congressional hardliners from Florida have introduced three bills proposing to deny contracts to such firms or visas to their employees. The bills are designed to appeal to anti-Castro constituencies in the run-up to the elections, but widespread haggling over the issue is set to increase as Cuba’s drilling plans progress, and the issue could become a talking point for presidential candidates in battleground states. For its part, Cuba will keep scrambling to convince the international community that it will uphold international safety standards. But those PR efforts will do little to cool the heated debate brewing on the Hill.

That said, none of the bills is likely to move anytime soon, given another powerful constituency: oil. Pro-drilling legislators in the House will be wary of punishing foreign oil companies (some of which have U.S. operations). The issue will also be overshadowed by pre-election priorities such as job creation. In the absence of Congressional action, the administration will likely take an ad-hoc approach. It might twist companies’ arms behind closed doors, as it recently tried to do with Spain’s Repsol, to get them to abandon their plans altogether. Or, if that doesn’t work, it might simply push for guaranteed safety compliance. Measures that involve engaging directly with Cuban officials are unlikely, leaving room for less controversial alternatives such as allowing companies that specialize in emergency response to contract with Cuba and creating some kind of exception to the embargo that allows Cuba to use certain U.S.-manufactured equipment to prevent or minimize spills.

Risa Grais-Targow is a member of Eurasia Group’s Latin America practice.