A change of course in Cuba and Venezuela?

By George Friedman
September 24, 2010

The following are excerpts from STRATFOR’s geopolitical weekly column by George Friedman, chief executive officer of STRATFOR, a global intelligence company. He is the author of numerous books and articles on international affairs, warfare and intelligence. His most recent book is “The Next 100 Years: A Forecast for the 21st Century.” The opinions expressed are the author’s own.

Strange statements are emerging from Cuba these days, with Fidel Castro reportedly saying that “the Cuban model doesn’t even work for us anymore.” There is little hiding that Cuba’s socialist economy has run out of steam. More interesting is what Cuba is prepared to do about it.

For decades, Fidel has maintained power by monopolizing the island’s sources of wealth. The Cuban leadership has controlled social welfare, using that power to secure loyalty and neutralize dissent. But that control has come at a cost: For the revolution to survive, Cuba must have sufficient private investment under state control. That private investment has not been forthcoming.

So while Fidel has been busy making statements, his brother and successor, Raul, has been fleshing out a new economic strategy. This will see 500,000 workers, or 10 percent of the island’s workforce, laid off in a bid to develop private cooperatives to lessen the state’s burden.

The feasibility of the proposed reforms is not as interesting as the message of reconciliation embedded in the plan. Alongside talk of Raul’s reforms, Cuba has been making apparent political gestures to Washington. But these gestures are unlikely to capture Washington’s attention, so Cuba will need something more — and Venezuela could fit the bill.

Cuba and Venezuela face similar geographic constraints. Both are relatively small countries with long coastlines and primarily resource-extractive economies. Both lack options in their immediate neighborhood for meaningful economic integration except with the dominant Atlantic power, the United States. This essentially leaves Cuba and Venezuela two options — align with the United States or align with a stronger U.S. adversary.

Historically, both Cuba and Venezuela have swung between these two options. For most of the past decade, however, Cuba and Venezuela have found themselves in adversarial relationships with the United States but without strong allies to fend off the United States. As a result, Cuba and Venezuela have drawn closer to each other.

In the process, Cuba has entrenched itself in nearly all sectors of the Venezuelan state from the upper echelons of Venezuela’s military and intelligence apparatus to its ports and factories. This gives Cuba significant influence over a Venezuela struggling with stagflation, power outages, food shortages and other woes. Though Venezuela’s open-door policy to Cuba was meant to bolster Caracas’ security, Cuba’s pervasive influence could become a threat — especially if Cuba shifts its orientation toward the United States.

Venezuela’s aggressive nationalization drive, role in drug trafficking and suspected support for Colombian rebel groups have soured U.S.-Venezuelan relations. More recently, the United States has watched with growing concern as Venezuela has enhanced its relationships with Russia, China and especially Iran. For the United States to take a real interest in Cuban overtures, it will likely want to see Cuba exercise its influence in Venezuela. More precisely, it will want to see whether Cuba can influence Venezuela’s relationship with Iran.

We therefore find it interesting that Fidel Castro recently has sought to portray himself as an advocate for Jews in contrast to the Iranian regime. Following uncharacteristically pro-Jewish remarks from Fidel, Chavez met with leaders of Venezuela’s Jewish community, a departure from his typical vituperative stance toward Israel. That same week, Venezuelan state-run Conviasa Airlines canceled its Caracas-Damascus-Tehran route, which had come under heavy U.S. scrutiny due to a reinvigorated U.S. sanctions campaign against Iran and concerns over Hezbollah transit through Latin America. Whether these Venezuelan moves were taken from Cuban cues is unclear, but we still find the developments interesting.

Each of these seemingly disparate developments does not make much sense alone. Looked at together, however, they begin to form a complex picture in which Cuba is cautiously orienting itself toward the United States and thereby increasing Venezuela’s vulnerabilities — which in turn will need strong allies for leverage against the United States.

So far, China appears the most promising fit for Venezuela, although there are complications to such an alliance. In one important sign of cooperation, China and Venezuela signed a deal for Beijing to lend $20 billion to Caracas in exchange for crude-oil shipments and stakes in Venezuelan oil fields. Whether such deals will reach fruition remains a big question. Subsidizing countries is not cheap, and China has yet to show a willingness to take a more confrontational stance with the United States over Venezuela. Venezuela’s challenge is thus to persuade China (or another suitable ally) to move from economic partner to strategic patron.

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[...] it has been noted that: Following Fidel’s uncharacteristically pro-Jewish remarks, Chavez, who has echoed his [...]

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