A Recent History of US-Cuban Relations in the Mining Sector

Introduction

Having covered the history of Cuban mining in the article from which this post is linked, it is now appropriate to take a “current-state” look at the industry as well as get some idea of what the future may look like. While the relationship between the United States and Cuba has been rough on both countries, there is certainly hope for a bright future in which the two nations use their strengths to help each other and even the world as a whole. But how will that bright future come to fruition? And if it does, how exactly will it be mutually beneficial? Let’s take a look.

Pre-Embargo Mining in Cuba (1500 – Mid 20th Century)

Since Cuba’s colonization by the Spanish in the early 16th century, the mining industry on the island has gone through many changes and despite its tumultuous history, has proven to be among the country’s most lucrative industries[7]. In its very early years, copper and gold were the top two minerals and were predominantly extracted through slave labor, enforced by Spanish control. In the mid 1800’s after many mines were destroyed in the Ten Years’ War, and Spanish control began to dwindle, iron rose as the premier Cuban mineral.[1] This change was inextricably tied to the industrialization of the United States – and much of the world as a whole – and it was U.S. firms that dominated the iron mining industry in Cuba by the early 20th century.[2] This time period, in which the US began its business involvement in Cuba – not limited to just mining, but also including many other resources – marks the beginning of what would become a very tenuous relationship between the two countries.

The Embargo

During the mid to late 20th century, following the second world war, the political atmosphere of the world was characterized by an intense conflict of ideologies. Capitalism opposed communism and countries under either of those systems were in a race to prove who was the most powerful. In October, 1960, the United States, under President Eisenhower, cancelled 700,000 tons of sugar imports from Cuba[3] and enacted an embargo prohibiting the sale of all products(excluding food and medicine) to Cuba in an effort to cripple the budding communist government. In response to this, the Cuban government, led by Fidel Castro, nationalized all U.S.-based businesses on the island without any compensation to their owners.[4] In the mining industry alone, the United States’ involvement was so extensive, that this nationalization represented an immense monetary loss to US businesses. Over the next few decades, the US embargo would increase in severity as diplomacy between the two nations worsened and by 1962 would include a unilateral ban on all imports from Cuba.[5]

Post-Embargo Mining in Cuba (Mid 20th Century – Present)

Initially following the embargo and nationalization of essentially the entire industry, state-controlled mining continued in Cuba . As iron reserves were depleted, other minerals, such as manganese, copper, nickel, and cobalt became the focus of mining projects[6], predominantly located in the eastern end of the island. Nearly two decades after the widespread nationalization, the Cuban government began to take steps to amend their mineral laws and in 1993, formed Geominera, a private company that would use state funds for the purpose of gold and base metal exploration.[6] The following year, Sherritt International, a Canadian resource company executed a joint venture mining concession and distribution agreement with the Cuban government which gave them rights to the extraction and exportation of nickel and cobalt from the formerly US-owned mine at Moa Bay.[6]

Nickel and Cobalt

For the past two decades, nickel has been in the spotlight as Cuba’s premier mineral,[2] together with cobalt representing the country’s largest export, reaching revenues as high as USD$2 billion in some years.[6] On a global scale, for both of these minerals, Cuba has become a top producer, ranking tenth in nickel production[7] and accounting for around 8% of worldwide cobalt production. In fact, the province of Holguín on the northeast coast Cuba is estimated to contain 34% of the world’s nickel reserves, upwards of 3 billion tons of metal.[6] During World War II, this immense quantity of ore attracted the attention of the United States, as they aimed to fill a supply gap they had been experiencing in these two important minerals. With an already dominant presence in the Cuban mining industry, and numerous iron mines already established in Holguín and neighboring provinces, the U.S. wasted little time in developing the Moa Bay complex to satisfy their nickel and cobalt needs. Nearly 40 after it’s development, and 20 years after its subsequent nationalization, the rights to mine at Moa Bay were, as previously stated, given to Canada’s Sherritt International. This followed a similar trend of foreign investing in/use of formerly U.S.-owned property in Cuba that garnered a stiff response from the U.S. Government in the form of the Helms-Burton Act.

The Helms-Burton Act

Enacted in 1996 by the U.S. Government under the Clinton administration, the Helms-Burton Act aimed to strengthen the United States’ embargo on Cuba, specifically punishing foreign companies that were using formerly U.S.-owned expropriated property and land in Cuba.[8] One such example of this is Sherritt International’s involvement in the Moa Bay mine, which has resulted in as many as eleven executives of Sherritt being imposed travel bans to the United States.[6] These travel bans and other sanctions imposed on Sherritt as a whole under the Helms-Burton Act, though they are criticized by left-wing politicians as being too severe, represent only a portion of the challenges faced by the company(and many others) as a direct result of U.S. relations with Cuba.

Sherritt International

Starting in 1994, Sherritt International’s involvement in Cuban mining has focused mainly on the nickel reserves at and around Moa Bay. Their agreement with the Cuban government included not only rights to the mining and processing of nickel and cobalt ores in the current complex, but also gave Sherritt the rights for phased expansion of the mine.[6] While the immense quantity and relatively low cost of Cuba’s nickel reserves might make this seem like an easy profit for Sherritt, the state of U.S.-Cuba relations has complicated the operation namely in the form of high transportation costs, as well as monetary penalties under the Helms-Burton Act[9]. As a result of the U.S. embargo on Cuba, ore mined in Cuba may not enter the US at any point in its lifetime meaning that Sherritt must take the “long way” to transport ore from Cuba to their processing facilities in Canada. Currently, this means Sherritt must haul the metal more than 2000 miles up the east coast of the United States by boat to a port in Quebec, and then another 2300 miles over land before it reaches its final destination in the eastern province of Alberta.[9] The harm caused by such a lengthy shipping route is twofold. Firstly, to Sherritt, it means extremely high transportation costs that, as energy prices rise in the future, could compromise the economic feasibility of the entire operation. Secondly, and also more importantly, such a lengthy shipping route imparts a tremendous environmental cost on the entire world. And with atmospheric carbon levels continually on the rise, in the face of catastrophic climate change, these shipping routes simply won’t be an option. To reiterate, both of these costs, and many other costs in the same vein of both economic and environmental hardship have been a direct result of the United States’ unrelenting diplomatic conflict with Cuba. And, up until the last few years, it looked as though this conflict would not be ending any time soon.

A New-Old Partnership

In late 2014, the U.S. Government under the Obama administration announced that it would be initiating a process of normalizing its diplomatic relationship with Cuba.[10] Additional directives over the next few years worked to facilitate more interaction between the two nations in terms of both travel and commercial engagement. Though long overdue, this step opens the possibility of a bright future for the two countries. According to a 2015 U.S. Geological Survey report, in the Cuban mining and energy industry alone, there are over 240 different projects hoping to attract investment capital for development.[11] Having been cut off from U.S. investors for so long, Cuba is ripe for investment in the form of U.S. dollars, and mutual benefit in many forms could be derived on both sides from the production of energy and other resources. However, it is important to note that, while potentially economically beneficial, the expansion of any country’s extractive industries is not always a good thing for the environment and this article should not be interpreted in any way to conclude that. What it does aim to show, however, is that forcing other countries to work around you in a way that is environmentally disastrous is necessarily a bad thing for the environment and is moving in completely the wrong direction. Instead, countries like the United States and Cuba that have been endlessly at odds must work to strengthen their ties and aim to utilize each others’ strengths for the universal goal of halting climate change, and setting the international stage for an environmentally neutral future. Improving relations between specifically the U.S. and Cuba opens up the possibility of working together to tackle these environmental issues and with the current Trump administration working tirelessly to undo much of the progressive work done under the Obama administration, The United States will have to work hard to realign its focus and continue to build bridges, rather than burn them.

 

Bibliography

[1] 22 The Engineering and Mining Journal, Vol. 66, No. 9 (27 August, I898), p. 252.
[2] “Iron Mining and Socio-Demographic Change in Eastern Cuba.” Journal of Latin American Studies, by Lisandro Perez, 2nd ed., vol. 14, Cambridge University Press, 1982, pp. 381–405.
[3] Ike Slashes Sugar Quotas, Chicago Tribune, July 7 1960
[4] Lee, Brianna, and James McBride. “U.S.-Cuba Relations.” Council on Foreign Relations, Council on Foreign Relations LINK
[5]  “Case Studies in Economic Sanctions and Terrorism: US v. Gta 5 (1960– : Castro)” (PDF). Peterson Institute for International Economics. October 2011.
[6] “Putting the Cuban Nickel and Cobalt Resources Back into Its Orbit.” Market Analysis Intel, InvestorIntel, 25 Sept. 2014 LINK
[7] “10 Top Countries for Nickel Production.” Nickel – Investing News, Investing News Network, 6 Apr. 2018
[8] COHA. “Helms-Burton Act: Resurrecting the Iron Curtain.” COHA, Council on Hemispheric Affairs, 10 June 2011 LINK
[9] Ritter, Arch. “THE SHERRITT–CUBA JOINT VENTURE: UNCERTAINTIES FOR BOTH PARTNERS.” The Cuban Economy – La Economía Cubana, 6 Sept. 2016 LINK
[10] Statement by the President on the Presidential Policy Directive on Cuba.” National Archives and Records Administration, US Government, 14 Oct. 2016 LINK
[11] Jamasmie, Cecilia. “Over 240 Mining and Energy Projects Waiting for Investors in Cuba.”MINING.com, InfoMine, 21 Apr. 2015. LINK