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Venezuela: Cuba’s Oil Sugar Daddy

Venezuela has the largest proven oil reserves in the world. Before the arrival of Hugo Chávez to the presidency in 1999, Venezuela’s oil production was in a constant rise up to 3.4 million barrels per day. Nowadays, this amount has fallen below 750 thousand barrels per day. Over the past 19 years, Cuba has benefited from a constant preferential treatment of oil supply.

In October 2000, late President of Venezuela Hugo Chavez (1999-2013) and President of Cuba Fidel Castro (1976-2008) signed the Comprehensive Cooperation Agreement which specified that Venezuela would supply 53.000 oil barrels to Cuba on a daily basis, amount later increased to 90.000. In return, the Caribbean island would provide military and intelligence advisers, teachers, doctors, and art instructors to primarily poor areas. 

A lot has changed since then. After Chavez’ death in 2013, his recently-proclaimed vice president Nicolás Maduro assumed Venezuela’s presidency. In parallel, Fidel Castro’s brother and Cuban President Raul Castro (2008-2018) was replaced by Miguel Díaz-Canel. Despite the arrival of new leaders and shape of the political landscape in both countries since the Comprehensive Cooperation Agreement was signed, the political parties in charge are still the same: the Communist Party of Cuba (PCC) and the United Socialist Party of Venezuela (PSUV).

During the last decades, Venezuela based its economy solely on oil, isolating the other sectors. On its cusp, out of every dollar that came to the economy from exports, 99 cents came from oil. After the fall of oil prices in 2015, a major economic crisis hit the country. Today, Venezuela has the lowest minimum wage in the region, below $8 a month. The International Monetary Fund (IMF) projected inflation for 2019 to be 10.000.000% and reported the economy has shrunk by over 65% since 2013. This crisis led over 4 million to flee out of the country since 2014, which is about 13% of the total population.

Associated Press

Between 2007 and 2014 Cuba received an average of 105.000 oil barrels per day from Venezuela. During this period, oil prices were booming, reaching over $90 a barrel with the exception of a fall in 2009. This would total a sum of approximately 3.4 billion dollars a year worth of oil, which Venezuela was essentially gifting to Cuba. As oil prices (WTI) stayed high, Venezuela had not faced the collateral damage of the agreement yet. 

Last April, the Venezuelan National Assembly, considered by many as the only legitimate institution in the country, ruled majoritarily by the opposition party, approved to cut oil supplies to Cuba. Juan Guaidó, President of the National Assembly, announced this action would save at least $943 million a year. However, Cuba continues to benefit from Venezuela’s oil supplies as PDVSA, the state-owned oil company, is under strict surveillance by military personnel backing President Nicolas Maduro. 

Between September and the first days of October 2019, a total of 5.81 million oil barrels would have been sent to Cuba reveals Refinitov EIkon data. Meanwhile, Venezuela experiences its worst economic crisis in recent history. This raises questions on how Venezuela truly benefits from oil supplies to Cuba.

A turning point in the Venezuela-Cuba relations was from 2002 and 2003 during an oil strike which was preceded by a coup d’etat. In the midst of all the uncertainty, Hugo Chávez needed someone he could trust and be loyal to; and Fidel Castro was that person. Since then, the relation between the two countries strengthen up to the point where Venezuela lost part of its sovereignty. It became evident Cuba had a saying in its national matters. Venezuela’s president, vice president, chancellor, etc; would travel to Cuba before key moments and important decisions, such as elections or economic measures, that had nothing to do with Cuba.

Antonio Marín Segovia

A recent BBC report revealed that Cuban doctors working abroad are only paid between 10% and 25% of their salary. The remainder is claimed by the Cuban government. Brazil’s current President, Jair Bolsonaro ended the program and revoked the visas of these doctors under the same reasons, arguing that they were working slaves. On top of Cuba’s free Venezuelan oil supplies, the country also makes profits from the programs under which their professionals work abroad. 

Former US National Security Advisor, John Bolton said it is estimated that between 20.000 and 25.000 Cubans are infiltrated in Venezuela as military and paramilitary functionaries. For Bolton, if it weren’t for them, Nicolas Maduro would no longer be president. Therefore, Venezuela’s dictatorship is subsidizing oil in Cuba to stay in power. 


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