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The debt to Russia that we did not know about

It was commonly believed that, since 2014, Cuba had no debts with Russia, but we now know that this is not the case.

Miguel Diaz-Canel and Vladimir Putin at the Kremlin, 2018.
Miguel Diaz-Canel and Vladimir Putin at the Kremlin, 2018. Reuters

It was thought that Cuba had no debt with Russia since Vladimir Putin, in 2014, let the country’s $30 billion debt from the Soviet era lapse. However, it turns out that since then Havana has accumulated 2.3 billion in debt, 10% of the previous one, which it clearly cannot pay.

Suddenly, we have learned that Russia’s Duma (lower house of Parliament) ratified on Tuesday, February 22 a regulation granting Havana an extension on the payments of Russian governmental loans until 2027.

It is evident that Cuba’s Communist regime handles everything that has to do with its international economic relations with the utmost discretion. As an excuse, it cites the embargo, or blockade, but it is hard to see how this debt with Russia could be affected by the dispute with the US. Rather, the opposite seems to be the case.

The fact is that between 2006 and 2019 the Russian Government granted loans to Cuba worth 2.3 billion dollars, earmarked to finance Russian-Cuban projects in the fields of Energy, the Metallurgical Industry and Transportation, as well as for the provisioning of goods necessary for the development of the island's economy. It is necessary to know how those projects ended up and what they actually produced. Of course, since they are related to investment in infrastructure, it is hardly surprising that they have evaporated, considering that the share in GDP of these investments rarely exceeds 10% ? one of the lowest percentages in Latin America, where it usually exceeds 25%.

In early 2020 Cuba stopped payments on Russian loans, increasing its debts with Russian commercial banks and exporting entities. At the request of the Cuban side, which asked for a revision the payment terms on these credits, in accordance with a decision by the Russian Government, on August 7, 2021, intergovernmental protocols aimed at extending the payment of credits were signed. The document approved on Tuesday stipulates that the last payment is to be transferred on December 15, 2027. It remains to be seen whether this is confirmed or also evaporates.

According to the basis of the protocol between the two countries, the funds that the Russians should receive in 2020-2021 for payment of the debt, and interest on it, amounted to 57 million dollars, which Cuba has announced it will not pay. This amount is supposed to be recovered between 2022 and 2027 thanks to the extension of the payment term, which will entail the payment of an additional 11 million dollars in interest, approximately. At no time has there been any talk of debt cancellation.

A noteworthy aspect is that the agreement was reached in the midst of the Russia-Ukraine crisis, after a meeting held last Friday between Russian Vice-President Yuri Borisov, visiting the island, and several Cuban leaders, with the aim of expanding bilateral collaboration; that is, to suspend Cuba’s debt payments. The two parties took advantage of the meeting to issue propaganda and reiterate their common critical positions towards the US.

Borisov was received by Cuba's Deputy Prime Minister Cabrisas and executives of the Transport, Energy, Industry and Banking sectors, beneficiaries of the Russian operations financed with loans. Information on the status of these projects would be in order.

Prior to this meeting, last January, in the midst of the tensions caused by the presence of Russian troops on the Ukrainian border, and while the US, NATO and the European Union were trying to alleviate the crisis by diplomatic means, it was learned that Russian President Putin had had a telephone conversation with Miguel Díaz-Canel in which, apparently, the default agreements were reach, which, in diplomatic language translates into "restructuring" of the debt.

According to a Kremlin statement, between Diaz-Canel and Putin there was "a profound exchange of views on the issue of bilateral trade, economic and investment cooperation," as if they had not talked enough about these issues in the past.

Days before the telephone conversation between the two leaders, Russian Deputy Foreign Minister Sergei Ryabkov said that Russia could deploy military resources in Cuba and Venezuela, which sparked a wave of criticism and reactions both from Cuban dissidents on and off the island, as well as from democratic governments.

Proof of this is also the official visit to Cuba, hours before the Russian invasion of Ukraine, of Vyacheslav Volodin, president of the Duma and a man who enjoys Putin's absolute confidence. In Havana he discussed bilateral "cooperation" with Cuban leaders and then traveled to Nicaragua, another ally of Moscow in the region.

Cuba's Communist regime, Putin's ally, is weathering a serious economic crisis, and settling its debt is unfeasible. Thus it has taken advantage of Russia's situation in Ukraine to take advantage of the occasion and not pay, while Russia is exploiting the situation to project an illusion of cooperation, which does not really exist, since, as we have seen, Putin's supposed multilateral aid to poor countries will end up being paid, sooner or later, even if it is in 2027.

Along with the non-payment to Russia, it should be noted that the Communist regime did the same thing with the Paris Club when last June it restructured the terms of the 2015 agreement for the payment of its debt with its Club creditors, securing an 8.5 billion dollar write-off on the 11.1 billion dollars owed. A gift.

In light of the above, it seems that it is high time for Cuba's Communist regime to offer transparency and credibility with respect to its international debt. The creditors of the international debt, the media and, in particular, the governments involved, should demand from the Castro regime information regarding its financial obligations, like those offered by other countries, and make any short or long term loans conditional on this disclosure. It is no longer enough to justify this concealment with the question of the embargo or blockade.

Only with transparency and accountability will it be possible to ascertain the magnitude of the insolvency of an economy that, at least internally, has mortgaged 20% of its GDP on a deficit that it cannot control, and an accumulated debt level amounting to 120% of its GDP. The numbers do not add up.

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