CUBA: Fuel Supply Worries partly Eased by Venezuelan Oil Imports

By Patricia Grogg Reprint | | Print |

Patricia Grogg

HAVANA, Sep 18 2002 (IPS) - The arrival of two shipments of Venezuelan oil confirmed the resumption of imports to Cuba under an energy agreement between the two countries, although there is still concern over fuel supplies in this Caribbean island nation.

Deliveries of 240,000 and 300,000 barrels of crude reached ports in Cuba on Tuesday and last Friday – the first imports of Venezuelan oil since the agreement was suspended in April.

“It’s not much, but it provides some relief,” Fernando Camacho, a resident of Santiago de Cuba, where the first shipment arrived Friday, said by telephone. Blackouts caused by fuel shortages have become more frequent in that city in the past few months.

The agreement signed in 2000 by Cuban President Fidel Castro and his Venezuelan counterpart Hugo Chávez, guaranteeing Cuba 53,000 barrels a day of crude, was cut off in April during a short- lived coup that removed Chávez from power for two days.

The condition that Venezuela set for the resumption of imports was the refinancing of a 142 million dollar debt that Cuba owed on previous shipments.

The Cuban government has promised to pay off the debt in seven installments, the first of which has already been paid, according to sources with the Venezuelan government.

The suspension of Venezuelan oil shipments forced Cuba to turn to middlemen, with no financing and at prices up to 15 percent higher than those agreed on with Caracas.

Under the agreement, Cuba pays 80 percent of the cost of the oil within 90 days of delivery. The remaining 20 percent is payable in 15 years, with a two-year grace period, at two percent interest – terms that according to Chávez’s critics are too soft.

But Chávez has responded to his adversaries that Cuba is paying for the petroleum, and that Venezuela is not giving it away. He also points out that Caracas has signed similar agreements with 12 other nations in the Caribbean and Central America.

Venezuela delivered 25.6 million barrels of oil, with a total value of 675 million dollars, between December 2000 and April 2002. The Cuban government has so far paid 439.7 million dollars.

The agreement with Venezuela covers one-third of annual demand for oil in Cuba, which in 2001 spent one billion dollars just to import the fuel needed to fire its seven thermoelectric plants.

According to government statistics, Cuba imports around 100,000 barrels of oil a day, while it produces the equivalent of 75,000 to 80,000 barrels a day of crude and natural gas.

In late 2001, the power industry consumed around 70 percent of the fossil fuels produced in Cuba – a proportion that the government hopes to increase considerably through the upgrading of the island’s thermoelectric plants.

This month, Castro said the energy deal with Venezuela somewhat eased the situation for his cash-strapped government, by reducing the payments which immediately fall due.

But many Cubans are following the tense political situation in Venezuela with concern, because the oil imports accord depends on stability in that country.

Castro has also expressed concern over the impact that an eventual United States attack on Iraq would have on oil prices.

The president warned that the price of crude could shoot up to 40 dollars a barrel, from the current 28, in the event of a U.S. military strike against Iraq.

An attack would lead to the need for “drastic” rationing of fuel, said the president, who added that the government was already studying “all of the measures that would be necessary in such an emergency scenario.”

The fall in the number of tourist arrivals since the Sep 11, 2001 terrorist attacks on New York and Washington, and the slump in the price of sugar – Cuba’s two main foreign exchange earners – prompted the government to slash fuel allotments this year to public enterprises and institutions.

The country’s main thermoelectric plant, located in Matanzas, about 100 kms from Havana, has been repaired and upgraded, and as of October will generate 330 megawatt-hours, fired by Cuban oil.

That will represent considerable savings, because the plant used to consume half a million tons of imported oil a year, according to official sources, who noted that domestically produced petroleum and natural gas cost 30 to 40 percent less than imported fuel.

Cuba hopes to produce around 3.5 million tons of oil this year and 644 cubic metres of natural gas, which would cover 47 percent of the island’s consumption needs, the Central Bank reported.