Cuban Offshore Drilling: Preparation and Prevention Within the Framework of the United States' Embargo

Author:Richard Sadowski
Position:Class of 2012 J.D. candidate, at Hofstra University School of Law, NY
37FALL 2011
by Richard Sadowski*
Cuba plans to drill seven exploratory oil wells in the
Gulf of Mexico by 2014.1 Some argue that the threat of
Cuban offshore oil drilling will increase the embargo’s
costs and that U.S. oil companies will miss out on oil exploration
that will go to foreign countries.2 In response, some U.S. law-
makers and U.S. oil lobbyists have advocated for an exception
to the Cuban embargo permitting energy cooperation.3 Notwith-
standing these concerns, the long-standing Cuban embargo is an
economic restriction with a significant purpose and should not
so easily be forsaken.
This article argues that, despite the added pressure Cuba’s
offshore oil developments have placed on U.S. policy, the embar-
go’s twin goals of bringing democracy to the Cuban people
and ending their oppressive rule have not been met. Thus, now
is not the time to lift or ease the embargo. The embargo itself
serves to restrict Cuba’s drilling efforts4 and new legislation may
further hamper Cuba’s exploration.5 Additionally, the economic
concerns of the U.S. energy industry do not warrant a change
in the U.S. foreign policy toward Cuba, and those concerns can
be better met by tapping U.S. resources. Furthermore, fears of
a Cuban oil spill can be assuaged through less drastic measures
such as an oil spill emergency response agreement with Cuba,
similar to the one that the United States has enacted with Mexico.
In 1960, President Eisenhower ended U.S. sugar purchases
from Cuba and halted all oil deliveries to Cuba in response to
the then new communist government under Fidel Castro.6 These
sanctions were put into place to destabilize Castro’s new govern-
ment and promote democracy.7 The Foreign Assistance Act of
1961 authorized the president to impose a “total embargo upon
all trade between the United Stated and Cuba.”8 On February 7,
1962, President Kennedy signed an Executive Order9 utilizing this
authority to initiate the Cuban embargo.10 This was followed by
the enactment of the Cuban Assets Control Regulations on July 8,
1963,11 under the Trading with the Enemy Act (“TWEA”).12
In 1996, during the Clinton administration, the Helms-
Burton Act13 was passed in an effort to prevent foreign com-
panies from trading with Cuba.14 The Helms-Burton Act also
codified much of the embargo as well as restricted the power
of the President to unilaterally remove the embargo.15 President
Obama recently eased restrictions through the Omnibus Appro-
priations Act of 200916 and has planned even further changes.17
The Cuban government applauded these new measures, but
averred that the United States did not go far enough to ease
the economic sanctions.18 According to the Cuban Foreign
Minister, Bruno Rodriguez, U.S. policy has, in fact, become
more restrictive.19 Indeed, these changes stop well short of
ending the embargo20 or even opening dialogue between the
United States and Cuba.21 Ultimately, trade between the United
States and Cuba remains heavily restricted.
The embargo on Cuba has widespread and significant
economic effects for both the United States and Cuba. Various
provisions of the embargo impact Cuba’s ability to obtain U.S.
technology and to work with U.S. companies.22 Additionally,
TWEA prohibits U.S. oil exploration companies from dealing
with Cuba by prohibiting the transfer of assets in which the
Cuban government or Cuban nationals have an interest.23
On September 9, 2009, Platte River Associates (“PRA”),
a U.S. company, was fined for violating TWEA.24 PRA sold
oil and gas exploration software to the Spanish oil company
Repsol25 even though PRA was told that the software was being
utilized for drilling in Cuban waters.26 Describing the serious-
ness of the violations, United States Attorney David Gaouette
explained that “[t]rading with the enemy is a serious crime,
and in this case, a Colorado company has been rightfully held
accountable for committing that crime.”27 PRA was sentenced
to a fine of $14,500 for its violations.28 This case exemplifies
the extent of the embargo and the related laws to restrict Cuba’s
access to offshore-drilling technology.
A U.S. Geological Survey estimates that Cuba’s offshore
oil fields hold at least four and a half billion barrels of recover-
able oil and ten trillion cubic feet of natural gas.29 Cupet, the
state-owned Cuban energy company, insists that actual reserves
are double that of the U.S. estimate.30 One estimate indicates
that Cuba could be producing 525,000 barrels of oil per day.31
Given this vast resource, Cuba has already leased offshore oil
exploration blocks to operators from Spain, Norway, and India.32
Offshore oil discoveries in Cuba are placing increasing pressure
for the United States to end the embargo. First, U.S. energy com-
panies are eager to compete for access to Cuban oil reserves.33
Richard Sadowski is a Class of 2012 J.D. candidate, at Hofstra University
School of Law, NY. Mr. Sadowski is also the Managing Editor of Production of
the Journal of International Business and Law Vol. XI.
Secondly, fears of a Cuban oil spill are argued to warrant U.S.
investment and technology.34 Finally, the concern over Cuban
offshore drilling renews cries that the embargo is largely a fail-
ure and harms human rights.
For U.S. companies, the embargo creates concern that they
will lose out on an opportunity to develop a nearby resource.35
Oil companies have a long history of utilizing political pressure
for self-serving purposes.36 American politicians, ever fearful of
high energy costs, are especially susceptible to oil-lobby pres-
sures.37 This dynamic was exemplified in 2008, when then-Vice
President Dick Cheney told the board of directors of the U.S.
Chamber of Commerce that “oil is being drilled right now sixty
miles off the coast of Florida. But we’re not doing it, the Chinese
are, in cooperation with the Cuban government. Even the com-
munists have figured out that a good answer to high prices is
more supply.38
This pressure for U.S. investment in oil is exacerbated by
America’s expected increase in consumption rates.39 Oil com-
pany stocks are valued in large part on access to reserves.40 Thus,
more leases, including those in Cuban waters, equal higher stock
valuation.41 “The last thing that American energy companies
want is to be trapped on the sidelines by sanctions while Euro-
pean, Canadian and Latin American rivals are free to develop
new oil resources on the doorstep of the United States.”42
Further pressure on the embargo comes from those voicing
environmental concerns about Cuba’s drilling plans.43 These
concerns are undoubtedly more poignant in the wake of Brit-
ish Petroleum’s (“BP”) historically tragic Deepwater Horizon
oil spill.44 Currently, there is no agreement between the United
States and Cuba to deal with oil spills.45 The embargo would pre-
vent, or at least hamper, any efforts by U.S. companies to aid any
cleanup efforts.46 In addition, the embargo bans U.S. technologies
designed to prevent or contain oil spills from being sold to Cuba.47
David Guggenheim, a senior fellow at the Washington
Ocean Foundation punctuated the United States’ concerns over
the potential impacts of Cuba’s drilling by remarking that “the
Gulf isn’t going to respect any boundaries when it comes to oil
spills.”48 This statement was recently exemplified by Cuba’s
own expressed fears that oil from the BP disaster would reach
its shores.49 The Deep Horizon oil spill’s threat was enough that
several Cuban leaders called for the reexamination of Cuba’s
own plan to extract oil off its shores.50 Nonetheless, Cuba’s oil
exploration plans seem unfazed.51
Many critics of the embargo complain that the policy is
inherently ineffective and actually exacts a human toll.52 They
note that many of the societal ills of the Cuban people are
furthered by the embargo’s economic impacts on Cuba. 53 For
instance, the American Association for World Health’s year-
long study of Cuba concluded that the embargo itself has led
to increased suffering and death in Cuba, a condition that has
been aggravated by the passage of the Helms-Burton Act.54
The study found that “the declining availability of foodstuffs,
medicines and such basic medical supplies as replacement parts
for 30-year-old X-ray machines is taking a tragic human toll.55
Further, they argue that the opposition of the Cuban people to
the embargo is ignored.56 Opponents view the embargo as a hyp-
ocritical U.S. policy that allows enthusiastic trade with China, a
communist nation where political oppression is at least as great
as in Cuba.57 These criticisms put further demands on the United
States to end the embargo in the interest of human rights.58
Despite calls for its revocation, the embargo’s pur pose is as
important now as when it was enacted. Cuba is still an oppressive
country.59 Cubans may not leave the country without permis-
sion and still lack fundamental freedoms of expression.60 José
Miguel Vivanco, the director of Americas division at Human
Rights Watch, notes that as “Cuba’s draconian laws and sham
trials remain in place, [the country] continue[s] to restock the
prison cells with new generations of innocent Cubans who dare
to exercise their basic rights.”61 Moreover, a recent proposal by
the Cuban Communist Party makes clear that there will be no
change in the country’s oppressive one-party political system.62
In doing so, the lengthy document declares “[o]nly socialism
is capable of overcoming the current difficulties and preserv-
ing the victories of the revolution.63 Cuba’s treatment of its
own citizens is a situation the United States cannot ignore. The
embargo’s twin goals of backing democracy and ending oppres-
sive rule have not been met. Until they are, the embargo must
remain in place.
Fears that Cuban offshore drilling poses serious environ-
mental threats because of the proximity to the United States and
the prohibition on U.S. technology transfer are overblown. Cuba
has at least as much incentive to ensure safe-drilling practices
as does the United States, and reports indicate that Cuba is tak-
ing safety seriously.64 Lee Hunt, President of the Houston-based
International Association of Drilling Contractors, said, “[t]he
Cuban oil industry has put a lot of research, study and thought
into what will be required to safely drill,” and that “they are
very knowledgeable of international industry practices and have
incorporated many of these principles into their safety and regu-
latory planning and requirements.”65 Thus, while the economic
embargo of Cuba restricts American technology from being uti-
lized, foreign sources have provided supplemental alternatives.66
Further, spill response planning can be implemented before
drilling begins. The United States currently has oil spill response
agreements with Mexico67 and Canada,68 but not with Cuba.69
As the Deepwater Horizon spill highlighted, planning for disas-
ter is essential. To achieve this goal, the United States can model
39FALL 2011
a Cuban plan on the Joint Contingency Plan between the United
Mexican States and the United States of America Regarding
Pollution of the Maritime Environment by Discharge of Hydro-
carbons or Other Hazardous Substances (“MEXUS Plan”).70
That plan originates from an agreement between Mexico and
the United States signed on July 24, 1980, and developed in
accordance with the International Convention on Oil Pollution
Preparedness, Response and Cooperation, adopted on November
30, 1990.71 The Plan pre-designates on-scene coordinators, a
joint response team, response coordination centers, rapid notifi-
cation protocols, and communications procedures for the event
of an oil disaster.72 The Plan has triumphed in test simulations,
which validates its concepts.73
The United States must initiate the same level of plan-
ning with Cuba. Given the proximity of potential Cuban wells
to the Florida coast, the need for a contingency plan is clear.
Fortunately, the MEXUS Plan provides a guiding framework
upon which the United States and Cuba can draw. Furthermore,
a recent Congressional report indicates that Cuba is open to
certain bilateral agreements with the United States, noting Raul
Castro’s willingness to engage with the United States where
mutual interests exist.74 Since an oil spill agreement is of mutual
interest, both countries should work to draft and implement it.
The United States’ thirst for oil should first be quenched
with local resources before resorting to end the embargo. Allow-
ing U.S. companies access to Cuban offshore oil fields would
effectively allow those companies to drill for oil in waters closer
to the U.S. coast than laws currently allow.75 J. Larry Nichols,
Chairman of Devon Energy, an independent U.S. oil and natural
gas producer, opined that “[w]hen U.S. companies are not even
allowed to drill in the eastern half of the Gulf of Mexico, we
have a long way to go before we can think about international
waters off the coast of Cuba.76 If access to oil is indeed the
main U.S. rationale behind lifting the embargo, this need is best
met by first allowing companies to drill more extensively in U.S.
Moreover, dependence on other countries for oil is not a
responsible option.78 Because the United States has the best oil
safety standards in the world, it is most environmentally com-
petent to tap America’s own natural resources.79 Fur thermore,
because drilling has yet to start, there is time yet for Cuban
political change to occur.80 Not only is there simply no pressing
need for Cuban oil, as portrayed by U.S. oil lobbyists, but U.S.
resources offer a more attractive alternative.81
Economic pressure has been weighing heavy on the Castro
regime, foreshadowing an end to its oppressive rule over Cuba.82
When asked if Cuba’s economic system was still worth export-
ing, Fidel Castro admitted, “[t]he Cuban model doesn’t even
work for us any more.83 Stephen Wilkinson, a Cuba expert at
the London Metropolitan University, notes that Castro’s words
are not a condemnation of socialism but rather “an acknowledge-
ment that the way in which the Cuban system is organised has to
change . . . [w]e can now expect a lot more changes and perhaps
more rapid changes as a consequence.”84 Fidel’s departure as
the leader of Cuba and Raul’s subsequent economic reforms are
indicative of imminent political changes, and signal the end of
communism in Cuba.85 These developments may result in an
improvement in Cuban human rights and social conditions. For
example, Raul has already eased the impact of the world food
crisis, released prisoners, and commuted death sentences.86
On January 21, 2011, Florida Congressman Vern Buchanan
introduced a bill in the House of Representatives aimed at
thwarting Cuba’s drilling efforts.87 The bill would permit the
U.S. Secretary of the Interior to deny drilling leases to foreign
companies that deal with countries under U.S. trade sanctions,
including Cuba.88 Following the successful application of U.S.
pressure on Repsol to pull out of drilling in Iran, Buchanan’s bill
is designed to again put pressure on Repsol to pull out of Cuban
drilling plans.89 Buchanan’s bill could threaten Repsol’s projects
elsewhere in U.S. territory where the company operates rigs near
Texas and Louisiana.90
While the success of the bill is not yet certain,91 foreign
firms should seriously weigh the rewards of Cuban oil against the
possible risk of being ostracized by America economically.92 Mr.
Buchanan’s bill is the proper approach for U.S. legislation and
policy to make a stand against Cuba’s offshore oil exploration.93
Since its inception, the Cuban embargo has ebbed and
flowed in severity and support. While the measure seems to be
increasingly unpopular, it takes legitimate aim at a Cuban regime
characterized by intolerance and oppression. Though the Castros
utilize the embargo as a scapegoat upon which to blame Cuba’s
failures,94 recent changes suggest the embargo is indeed close to
accomplishing its goals.95 Despite this, critics, including U.S. oil
producers, want the embargo dropped.
Regardless of criticism, the embargo must remain in place
until its goals are met. Environmental fears can be effectively
countered through bilateral response and preparation agree-
ments with Cuba. Also, economic and energy needs are more
properly addressed through drilling U.S. resources. Ultimately,
with the aid of legislation such as Buchanan’s bill, the United
States should exercise its political and economic power to pres-
sure foreign companies to avoid offshore drilling in Cuba. The
United States can dissuade foreign investment without compro-
mising the embargo. It appears an end to oppressive communist
rule in Cuba is nearing. Now is the time for the United States to
both reject offshore drilling in Cuba and demonstrate resolve in
meeting the goals of the economic embargo.
Endnotes: Cuban Offshore Drilling: Preparation and Prevention
within the Framework of the United States’ Embargo on page 63