Obama announces sweeping changes in Cuba policy

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ObamaCUBA STANDARD — In the wake of a prisoner swap that freed USAID subcontractor Alan Gross and the remaining three of the Cuban Five, the White House announced steps to ease the U.S. embargo against Cuba.

For the complete list of measures, click here.

The executive steps include establishing full diplomatic relations, most likely removing Cuba from the Department of State’s list of “terror-sponsoring nations,” an expansion of the list of permitted U.S. export goods; allowing U.S. banks to open corresponding accounts at Cuban financial institutions; allowing Cuba to pay for U.S. food imports upon arrival, rather than in advance; allowing the export of U.S. telecommunications appliances and devices and allowing U.S. telecoms to offer their services in Cuba; an expansion of application-free travel for U.S. citizens and residents, allowing travel providers to offer some Cuba services without having to apply for a license; allowing travelers to use U.S. credit and debit cards in Cuba; an increase of remittance limits; freeing remittance forwarders of licensing obligations; and allowing U.S. travelers to bring back small amounts of Cuban goods; and broader cooperation on migration, counter-narcotics, environmental protection, and human trafficking.

“Additional options for promoting the growth of entrepreneurship and the private sector in Cuba will be explored,” a White House statement said.

“President Obama’s decision deserves respect and recognition from the Cuban people,” said Raúl Castro about the prisoner swap in a statement simultaneously televised as Obama was speaking to reporters at the White House. Castro said he had a phone conversation with Barack Obama the day before and recognized the intervention of the Catholic Church and Pope Francis, as well as the Canadian government, in helping broker the deal. Castro also proposed “mutual measures” to improve relations.

“I exhort the U.S. government to remove the obstacles that impede or restrict the ties between our peoples, families and citizens of both countries, particularly for travel, direct postal service, and telecommunications, ” Castro said.Castro TV

The announcement sent analysts scrambling, trying to understand the implications for business. Also, implementation may take some time, as the Treasury and Commerce departments will have to amend regulations.

The Treasury Department’s sanctions enforcement arm said it expects to issue its regulatory amendments “in the coming weeks”. 

“None of the announced changes takes effect until the new regulations are issued,” the Office of Foreign Assets Control said in a statement.

The U.S. president’s announcement was greeted with “general euphoria” in the streets of Havana, according to observers there.

“Today, the United States is taking historic steps to chart a new course in our relations with Cuba and to further engage and empower the Cuban people,” a White House statement about the “Updated Policy Approach” said. “It is clear that decades of U.S. isolation of Cuba have failed to accomplish our enduring objective of promoting the emergence of a democratic, prosperous, and stable Cuba.”

“In the last month, President Obama has used executive orders to address the two largest structural impediments to better U.S. relations with Latin America; immigration, and Cuba,” said Peter Schechter, director of the Atlantic Council’s Latin America Center.  “We commend his leadership on both counts. Today, nearly 55 years of ineffective Cuba sanctions policy has come to an end.”

To be sure, while the executive can send a political signal, the body of U.S. sanctions against Cuba is enshrined in law, and it is ultimately up to Congress to ease or lift the embargo. Ironically, the same day news broke that Germany’s Commerzbank agreed to a billion-dollar settlement with U.S. sanctions enforcers, in part over transactions with Cuba.

As a taste of what the president’s policy might be up against, Florida Sen. Marco Rubio was fuming, very publicly. The U.S. government got “no concessions,” Rubio said on TV, adding the Obama Administration is “coddling dictators and tyrants.”

Even so, the president used strong political language.

“At times, longstanding U.S. policy towards Cuba has isolated the United States from regional and international partners, constrained our ability to influence outcomes throughout the Western Hemisphere, and impaired the use of the full range of tools available to the United States to promote positive change in Cuba,” the White House statement continued. “Though this policy has been rooted in the best of intentions, it has had little effect – today, as in 1961, Cuba is governed by the Castros and the Communist party. We cannot keep doing the same thing and expect a different result.”

“It does not serve America’s interests, or the Cuban people, to try to push Cuba toward collapse. We know from hard-learned experience that it is better to encourage and support reform than to impose policies that will render a country a failed state. With our actions today, we are calling on Cuba to unleash the potential of 11 million Cubans by ending unnecessary restrictions on their political, social, and economic activities.”

The White House’s embargo-easing steps include:

•Establishing full diplomatic relations with Cuba.

“The President has instructed the Secretary of State to immediately initiate discussions with Cuba on the re-establishment of diplomatic relations with Cuba, which were severed in January 1961,” a White House statement said. “In the coming months, we will re-establish an embassy in Havana and carry out high-level exchanges and visits between our two governments as part of the normalization process. As an initial step, the Assistant Secretary of State for Western Hemisphere Affairs will lead the U.S. Delegation to the next round of U.S.-Cuba Migration Talks in January 2015, in Havana. U.S. engagement will be critical when appropriate and will include continued strong support for improved human rights conditions and democratic reforms in Cuba and other measures aimed at fostering improved conditions for the Cuban people. The United States will work with Cuba on matters of mutual concern and that advance U.S. national interests, such as migration, counternarcotics, environmental protection, and trafficking in persons, among other issues.

•Travel operators are not required to apply for a license anymore. “Travelers in the 12 categories of travel to Cuba authorized by law will be able to make arrangements through any service provider that complies with the U.S. Treasury’s Office of Foreign Assets Control (OFAC) regulations governing travel services to Cuba, and general licenses will authorize provision of such services,” the White House statement said.

•Application-free travel under “general licenses” will be expanded, including travelers on family visits; and travel related to official business of the U.S. government, foreign governments, and certain intergovernmental organizations; journalistic activity; professional research and professional meetings; educational activities; religious activities; public performances, clinics, workshops, athletic and other competitions, and exhibitions; support for the Cuban people; humanitarian projects; activities of private foundations or research or educational institutes; exportation, importation, or transmission of information or information materials; and “certain export transactions that may be considered for authorization under existing regulations and guidelines”.

“It is clear from the statement that individual Americans and groups of Americans will have a general license for any of the listed activities. No applications; no reports,” said John McAuliff, founder of the New-York-based Fund for Reconciliation and Reconstruction, and a long-time advocate of normalizing relations. Even so, he was cautious about the implications. “My interpretation is that the underlined language means that as long as the traveler fits under these broad categories, he or she can use any travel agent to make arrangements, and presumably on line services. But I am seeking clarification.”

•Remittance limits will be raised from $500 to $2,000 per quarter for “general donative remittances to Cuban nationals.” “Donative remittances for humanitarian projects, support for the Cuban people, and support for the development of private businesses in Cuba” will no longer require a specific license. Also, remittance forwarders will no longer require a specific license.

•The list of permitted exports will be expanded, including building materials for private construction, and equipment and agricultural implements, to “empower the nascent Cuban private sector.”

•U.S. travelers will be allowed to bring back up to $400 of Cuban goods, including up to a combined $100 worth of tobacco products and alcohol.

•U.S institutions will be permitted to open correspondent accounts at Cuban financial institutions to facilitate the processing of authorized transactions.

•The regulatory definition of the statutory term “cash in advance” will be revised to specify that it means “cash before transfer of title”, allowing Cuba to pay for goods upon arrival rather than before departure.

•U.S. credit and debit cards will be permitted for use by travelers to Cuba.

•U.S. telecommunications companies will be allowed to export equipment to Cuba, offer services there, and establish infrastructure on the island. “The commercial export of certain items that will contribute to the ability of the Cuban people to communicate with people in the United States and the rest of the world will be authorized,” the White House statement said. “This will include the commercial sale of certain consumer communications devices, related software, applications, hardware, and services, and items for the establishment and update of communications-related systems. Telecommunications providers will be allowed to establish the necessary mechanisms, including infrastructure, in Cuba to provide commercial telecommunications and internet services.”

•Changes in sanctions enforcement affecting third countries. “U.S.-owned or -controlled entities in third countries will be generally licensed to provide services to, and engage in financial transactions with, Cuban individuals in third countries,” the statement said. U.S. persons will be allowed, under a “general license”, to participate in third-country professional meetings and conferences related to Cuba. And foreign ships are allowed to enter the United States “after engaging in certain humanitarian trade with Cuba.”

•Start trilateral talks with Cuba and Mexico about the U.S. maritime border in the Gulf of Mexico to fill the “donut hole.” “The United States is prepared to invite the governments of Cuba and Mexico to discuss shared maritime boundaries in the Gulf of Mexico,” the statement said.

•Taking Cuba off the State Department’s list of terror-sponsoring nations. “The President has instructed the Secretary of State to immediately launch such a review, and provide a report to the President within six months regarding Cuba’s support for international terrorism,” the statement said.

•Regarding Cuba’s participation in the 2015 Summit of the Americas in Panama in April, the president said that Cuban civil society groups must be allowed to participate. “A critical focus of our increased engagement will include continued strong support by the United States for improved human rights conditions and democratic reforms in Cuba,” the White House statement said. “The Administration will continue to implement U.S. programs aimed at promoting positive change in Cuba, and we will encourage reforms in our high level engagement with Cuban officials.”

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