Havana, Cuba. Pedro Szekely, CC BY-SA 2.0, via Wikimedia Commons

In May, the streets of Havana were filled with protesters after Cuba’s government confirmed the country’s diesel and fuel oil reserves had run out following a four-month US blockade. The US government initially halted the flow of Venezuelan oil shipments to Cuba after it carried out air strikes on Caracas and seized Venezuela’s President Nicolás Maduro in January. On 29 January, President Trump issued an executive order that threatened to impose tariffs on any country that tried to export fuel to Cuba.

As the energy crisis deepens, rolling power blackouts and fuel shortages have pushed the island’s economy and health system to breaking point as people scramble to access power, clean water, food and other essential supplies. More than 40 per cent of Cubans are now thought to be living in poverty. On 15 May, the country’s energy minister, Vicente de la O Levy, described Cuba’s energy system as being in a ‘critical’ condition in an interview with state-owned media.

Cuba’s fuel shortages have drawn international condemnation, including from UN human rights experts, who described the US executive order imposing a fuel blockade on the island as ‘a serious violation of international law and a grave threat to a democratic and equitable international order.’

The Trump administration continues to deny that the blockade and heightened sanctions are unlawful, arguing that they’re necessary to protect US national security and to ‘deprive Cuba’s communist regime and military of access to illicit assets.’ These actions, together with the indictment issued later in May against 94-year-old former leader Raúl Castro alleging he unlawfully targeted civilian planes in international waters in 1996, have been widely viewed as part of the administration’s continued efforts to topple Cuba’s communist regime. Miguel Díaz-Canel, Cuba’s current president, has said the charges against Castro are politically motivated and ‘devoid of any legal foundation.’

In mid-May, US Secretary of State Marco Rubio said the administration was reiterating its offer to provide $100m in humanitarian assistance to Cuba but stipulated that the aid would have to be distributed ‘in coordination with the Catholic Church and other reliable independent humanitarian organisations.’ Cuba’s foreign minister, Bruno Rodríguez Parrilla, dismissed claims that Havana had previously rejected this offer as a ‘fable.’

The impending threat of secondary sanctions has been enough to spook some international companies, meanwhile. Major airlines had already suspended flights to Havana in recent months. In early May, a North American mining company announced it was dissolving its activities in Cuba in response to the secondary sanctions.

David Gutiérrez, a Member of the IBA Latin American Regional Forum Advisory Board, says the exit of multinationals will only exacerbate the concerns of foreign entities already cautious about investing in Cuba. ‘The withdrawal of major international investors is undoubtedly significant for Cuba, as it reduces access to capital, technology and managerial expertise,’ he says.

However, the inclusion of Cuba’s military‑run conglomerate, Grupo de Administración Empresarial SA (GAESA), on the US designation list marks a pivotal inflection point for American sanctions policy on Cuba, says Christopher Sabatini, Director of the Latin America programme at think-tank Chatham House. ‘The argument always was that the military has such pervasive control over the economy and so when you loosen sanctions you’re enriching the military, you’re not actually reaching the people,’ he says. ‘The recent sanctions put on GAESA are a real game changer.’

Established in the 1990s to circumvent the US embargo, GAESA is estimated to control between 40 and 70 per cent of Cuba’s economy. The US government says GAESA funnels billions of dollars each year into offshore accounts.

The sanctions may finally allow the US to pursue GAESA’s shell companies that are registered in Panama, says Sabatini. ‘Any Panamanians or other foreign nationals who happen to be involved in these companies may well see their visas yanked,’ he says.

Sabatini says foreign investors will also be watching closely as progressive steps by the Trump administration to lift a decades-long suspension of private right of action under the US Helms-Burton Act 1996 are now playing out.

In 2019, President Trump reactivated Title III of the Act, which permits American nationals who own claims to property expropriated by the Cuban government since 1959 to file a lawsuit against any person in a US court who ‘traffics’ the property. In February, two lawsuits seeking millions of dollars in damages for property nationalised by the Cuban government were finally heard in the US Supreme Court coinciding with the latest flashpoint in relations between Washington and Havana. In May, the Supreme Court reversed the Eleventh Circuit’s ruling in one of the cases, finding that a US company could pursue a liability claim under Title III against four cruise operators for using Cuban port facilities confiscated in 1960. The case now returns to the appellate court.

In Cuba, as the economy continues to be squeezed, the government has introduced several new domestic regulations as part of broader reforms to encourage foreign private sector investment. Cubans residing abroad are now permitted to open small and medium-sized enterprises, as well as invest in the country’s agricultural sector and other areas that were previously off limits to the Cuban diaspora.

However, Gutiérrez – who’s Founding Partner of BLP Abogados in Costa Rica – is doubtful that such developments will bring the lasting change Cuba sorely needs. ‘Regulatory reforms are positive, but sustainable investment requires more than incremental legal adjustments,’ he says. ‘Investors seek independent institutions, enforceable contracts, transparent regulations and confidence that private property rights will be protected over the long term. Meaningful and lasting economic progress will depend on deeper structural reforms that provide a robust and reliable framework for domestic and international investors.’

Despite most Cubans surviving only on one meal a day, experts agree that Cuba’s highly repressive regime makes the prospect of a government overthrow extremely unlikely. ‘I also don’t know what the US government will accept, short of regime change,’ says Sabatini. ‘One possible scenario is something very similar to what’s happening right now in Venezuela, which is that they make up some sort of three-phase transition plan.’

However, without public support, pursuing regime change in Cuba could prove much more challenging than for its Latin American neighbour. It’ll probably also be low down on the Trump administration’s priority list. ‘First the US needs to resolve the crisis with Iran and continue with the transition plan with Venezuela, not to mention the many other fronts the Trump administration has embarked on with other countries, such as […] its relations with Russia and China,’ says one US-based lawyer who preferred not to be named.