Page 6 - FSUOGM Week 41 2019

FSUOGM COMMENTARY FSUOGM
No short-term solutions for Cuban fuel shortages
The island state of Cuba is feeling some relief following the arrival of eight Venezuelan tankers, but it cannot expect a rescue by Venezuela or Russia
CUBA
WHAT:
Venezuela has succeeded in delivering 3.83mn barrels of crude and fuel to Cuba.
WHY:
Caracas has few options for making regular shipments, and Moscow is not offering short-term relief.
WHAT NEXT:
Sanctions are likely to hinder future Venezuelan shipments, and Russian upstream projects will not come to fruition for several years.
CUBA has been experiencing serious fuel short- ages in recent months, and the supply situation recently reached a critical point. On September 11, Cuba’s government said that it had not been able to procure enough gasoline, diesel and other petroleum products to meet demand for the rest of the month. It imposed new austerity meas- ures, such as encouraging travellers to use ani- mal-powered vehicles, and blamed US sanctions on Venezuela for the crisis.
Havana’s criticism of US policy was not mis- placed. In its drive to penalise Caracas, Wash- ington has been discouraging investment in Venezuelan oil and gas projects. Under the stricter sanctions regime imposed in January, it has sought to dissuade commodities traders, ser- vice companies, transport providers and other industry players from co-operating with Vene- zuela’s national oil company (NOC) PdVSA. This has caused problems for Cuba, since PdVSA has for some time been the main supplier of refined fuels to the island state.
In early October, though, relief appeared to be in sight. Eight Venezuelan tankers arrived in Cuba, bringing enough crude oil and petroleum products to ease shortages and boost refinery runs.
The deliveries came around the same time that Russian Prime Minister Dmitry Medvedev
began a two-day visit to Cuba. During his time in the country, Medvedev visited a field where Zarubezhneft, a state-owned Russian company, is collaborating with the Cuban NOC, Cuba- petroleo. He also spoke with President Miguel Diaz-Canel and other Cuban officials about plans for improving energy efficiency and co-op- erating on additional oil development projects.
These shows of support from two long-time allies probably lifted the spirits of officials in Havana. Even so, Cuba is probably heading for more fuel shortages.
Venezuela under pressure
For one thing, Venezuela’s ability to deliver suf- ficient volumes of fuel on a regular basis is very much in doubt.
As mentioned above, PdVSA is under a sig- nificant amount of pressure because of the US sanctions regime. Because of the trade restric- tions, the Venezuelan company is having a hard time borrowing money, chartering tankers and taking other steps that might facilitate fuel shipments.
As Francisco Monaldi, a Latin American energy expert at Rice University’s Baker Insti- tute, told Reuters last week, Caracas is having an increasingly difficult time finding partners for transactions related to the oil industry. “It’s
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