Dear BWR Subscribers,
“Barbershop Whispers….Russia” begins with “My Takeaways” on the main topic, followed by the main topic discussion. The last two sections of “Barbershop Whispers…Russia” are “Follow-ups” regarding previous publications and “Quick Bites” briefly addressing emerging events.
In last week's BWR, I discussed the EU’s changing attitude toward the long-awaited confiscation of the Central Bank of Russia’s (CBR) foreign reserves. Why is the EU hesitating, and what are the innovative methods being considered to exploit the CBR foreign reserves short of confiscation?
In this week’s BWR, I will discuss the mutually beneficial Russia-Cuba relationship. The economic and intelligence benefits.
Takeaways:
FRIENDS WITH BENEFITS: Cuba is the most important and cost-effective Kremlin ally in the Americas. It is the Kremlin’s model messenger for delivering anti-Western messages—the US and Spain—to the global south in Latin America (LATAM). Cuba benefits from money Russian tourists bring and subsidized crude oil and wheat deliveries from Russia.
BROTHERS IN ARMS: Cuba is the ideal and effective intelligence partner for Russia against the United States. Its proximity to the US, intelligence gathering expertise, and it is in the heart of LATAM. Cuba is the equivalent of a stationary aircraft carrier in LATAM. Russia can place SIGINT facilities there and recruit agents in LATAM with the help of Cuban intelligence.
Background
Over the past several years, the Kremlin has substantially increased its presence in Latin America (LATAM) (“Russia’s Footprint in Latin America”) as part of its global south foreign policy effort. This presence is primarily in the form of cost-effective anti-America disinformation campaigns through numerous traditional and digital media platforms operated by Russia’s traditional Soviet-era allies—Cuba and Nicaragua—as well as post-Soviet-era ally Venezuela.
During the Soviet era, Cuba was the financial, political, and intelligence centerpiece of Soviet LATAM operations, and it remains so for Russia today. According to an unclassified CIA document, the Soviet Union spent more than $33B supporting Cuba in the 25 years between 1959 and 1984. This support came in the form of crude petroleum, petroleum products, and wheat imports from the USSR — all at well below global market prices — in exchange for sugar, nickel, and citrus products, at prices well above the global market. The Soviets accounted for 70% of Cuba’s total trade until 1991, when the Soviet Union collapsed.
In return, the Soviets received a supportive and loyal ally in the heart of the Americas, from which they could freely launch intelligence and influence operations in LATAM and staunch support in the United Nations.
Today
The Kremlin retreated from the non-Soviet space during the Yeltsin years, but this trend was reversed upon Putin’s appointment and subsequent election as president of Russia in 2000. Since that time, thanks to the windfall of high oil prices fueling a strong Russian economy, the Kremlin gradually re-established its LATAM presence, particularly in the last ten years.
Limited Economic Power
In the absence of its Soviet predecessor's economic power, Russia has turned to debt relief as an important foreign policy tool to rebuild political alliances and restart trade relations with its Soviet-era and global south allies. One of the biggest beneficiaries of Russian debt forgiveness has been Cuba.
Cuba defaulted on its debt in the late 1980s. Russia was a member of the Paris Club, an informal group of creditor governments that included Canada, France, Germany, Japan, the United Kingdom, and the United States. By mid ’00, Cuba owed approximately $35B to the individual members of the Paris Club. In July 2014, ahead of Putin’s visit to Cuba, the Kremlin broke ranks with the Paris Club members and wrote off 90% of Cuba’s Russian debt. Other countries offered debt relief to Cuba; for example, China restructured approximately $6B, but Russia’s $32B write-off was the most generous. This deal ended a decade of difficult discussions between Havana and the Kremlin because Havana claimed the Soviet ruble-denominated debt was overvalued and that Cuba had suffered severe economic damage because of the collapse of the Soviet Union, Havana’s primary financial partner at the time.
In February of this year, Russian Foreign Minister Sergei Lavrov met with Cuban President Miguel Diaz-Canel and Foreign Minister Bruno Rodriguez in Havana. This is Lavrov’s third trip to Cuba in as many years. Last year, Boris Titov, the presidential commissioner for the rights of Russian entrepreneurs, also led a delegation of Russian businessmen.
The meetings between Lavrov and the Cuban ministers have focused on the common enemy, Uncle Sam, and his sanctions. Russia is now the most sanctioned country in history, but Cuba has been under sanctions by the US since Fidel Castro took control in 1959. During a televised interview on Cuban state-run media, Lavrov said:
"We cannot agree that the world should continue to live permanently according to these American 'rules….tensions are being escalated in the international arena, and the West's attempts to dictate its will and ignore the legitimate positions of others not only persist but are growing."
This is the anti-Western narrative that we heard during the Kremlin’s Russia-Africa Summit, a central theme in the Kremlin’s global south foreign policy message and disinformation war in LATAM.
Cuba is experiencing its worst economic conditions since the collapse of the Soviet Union. These conditions are a consequence of COVID-19, decades of poor management of state enterprises, and US sanctions against Cuba. Poor economic conditions have resulted in long lines for fuel, food, and medicine and have sparked unprecedented protests in regional cities such as Santiago de Cuba (a bastion of Fidelismo). Inflation in 2023 reached 45%, and $1 now trades for 240 pesos, ten times the rate of 24 to 1 in 2022.
The economic crisis has also resulted in one of the biggest waves of Cuban emigration, which the Cuban government has permitted and indirectly stimulated. More than 450,000 Cubans will have emigrated in 2022-2023 — an extraordinary number for a country of just 11 million people.
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In February, the Kremlin gave Cuba an "emergency" donation of 25,000 tons of wheat to combat shortages. Last month, it shipped 715,000 barrels of oil for the first time in over a year. The Kremlin has announced it will ship crude oil to Cuba each month for the next 12 months.
On the financial side, Boris Titov, head of the Russian delegation of the Cuban-Russian Business Committee, told a forum of Russian entrepreneurs last year in Havana that Cuba had decisively opened the door to Russian investment. As per Titov,
"They [Cubans] are giving us preferential treatment…the path is clear"
A significant and unusual agreement between Moscow and Havana to entice Russian investments into Cuba gave Russian businesses the right to utilize Cuban land on a 30-year lease. This contrasts with the 20-year renewable lease granted to Cuban farmers. Other incentives include land tax exemptions, new mechanisms to repatriate profits, and developing a new merchant marine company to attract investments and facilitate trade with Russia. Titov added:
"In Soviet times, there was a direct port and maritime link…we are analyzing this possibility with the owners of Cuban ships."
Bilateral trade between Cuba and Russia reached $450 million in 2022, three times that of 2021, according to Sergei Baldin, Russia´s trade representative in Cuba—ninety percent of that trade comprised petroleum products and soy oil sales.
According to Russian Deputy Prime Minister Dmitry Chernyshenko, several Russian banks are considering opening representative offices in Cuba.
This announcement follows the December 2023 rollout of the Russian payment card Mir in Cuba. Chernyshenko announced that regular flights to Cuba would begin again in July after the suspension of the flights due to air travel sanctions imposed on Russia in the wake of the country’s invasion of Ukraine. The suspension of Russian flights and the substantial drop in Russian tourists in Cuba in 2022 and 2023 hurt Cuba’s tourism sector. Until February 2022, Russians were the largest group of tourists in Cuba since the start of the COVID-19 pandemic. Cuba saw a 200 percent increase in Russian tourists, or over 146,000 individuals, from 2020 to 2021. Cuba’s Ministry of Tourism has hoped that a resurgence of Russian tourists could help bolster economic recovery.
Intelligence Services—Brothers in Arms
Dirección de Inteligencia (DGI), the Cuban intelligence agency, is a formidable and globally recognized effective agency whose primary focus is the United States. Through a network of recruited spies serving in “the struggle against America,” DGI gathers intelligence and trades it with Russia and China after it has been filtered for their purposes.
The most high-profile case highlighting the effectiveness with which DGI penetrates US government agencies is that of former US ambassador Victor Manuel Rocha. Rocha is believed to have been in the service of DGI since 1981. Between then and his subsequent retirement in 2002, he served several US foreign service overseas posts, including chargé d'affaires in Argentina and ambassador to Bolivia.
In contrast, the CIA has had a difficult time penetrating DGI and the Cuban government. In 1987, Florentino Aspillaga Lombard, a senior Cuban intelligence officer, defected and reported that every CIA agent on the island since the 1960s had been a DGI plant that fed misinformation to their CIA handlers.
In 1967, the Soviet Union built the Lourdes signals intelligence facility in Cuba. Its capabilities made it possible to intercept data from American communications satellites, telephone conversations, and messages from the NASA mission control center in Florida. By the mid-90s, when Russia and Cuba were short of cash, Russia was paying the Cuban government $200M/yr to keep it open. In 2001, the Kremlin decided to close the facility. Since 2014, there has been talk of reopening the facility, and the discussions to reopen Lourdes are gaining more traction today.
Follow-ups & Quick Bites:
Follow-ups:
No follow-ups this week.
Quick Bites
Russia Requests Observer Status in the African Affiliate of the Financial Action Task Force
Russia continues to seek (and find) ways to exercise soft power around the globe, particularly in the global south. Last week, a trade industry newsletter described how the Kremlin sought observer status in the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG).
The organization is the regional affiliate of the Financial Action Task Force (FATF), the global standard-setting body for combatting money laundering and terrorist finance. FATF suspended Russia’s membership in 2022, and Russia has since subsequently been fighting attempts to “black list” it, a move that would require financial institutions around the world to conduct enhanced due diligence on both sides of any payment involving the country — a move that would put the country on a par with North Korea and Iran.
Observer status at ESAAMLG would give Russia a level to steer discussions and potentially strike bargains with governments of the 20-member group. And with half of those members either formally designated as having weak AML regimes (“grey listed”) or failing to meet most of FATF’s technical standards, the African nations have something to gain.
European Court of Justice Rules in Favor of Russian Billionaires
The European Court of Justice (ECJ) in Luxembourg has lifted sanctions on Petr Aven and Mikhail Fridman, two of Russia’s most wealthy men. The ECJ said the bloc had failed to provide sufficient evidence that the men had supported the Kremlin's actions or policies against Ukraine. The ECJ document reads:
“The General Court upholds the requests of Petr Aven and Mikhail Fridman and annuls both the initial acts and the acts maintaining the lists of [EU] restrictive measures for the period from 28 February 2022 to 15 March 2023,”
The reaction in the Russian opposition has been mixed, as it is a divisive topic. Yulia Navalnaya, the widow of Alexei Navalny, wrote on X:
“Neither Fridman nor Aven have spoken out against the war or made any efforts to stop it—they’ve simply hired expensive lawyers and influential lobbyists.”
While they have won the appeal, there are still other sanctions, in the UK, for example, that still need to be addressed.
Vol 2, No 18 - BWR 14.04.2024
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