Fine Tuning the Cuba Embargo

This week, President Donald Trump will reportedly announce the re-imposition of certain economic sanctions on Cuba that were unwound during the recent diplomatic thaw between the United States and its southern neighbor. This re-imposition is not a return to the previous comprehensive embargo meant to strangle the Cuban economy. Rather, it is the smart use of U.S. economic power to continue to put pressure on the Castro regime for its continued human-rights abuses, even as Americans interact directly with the Cuban people.

President Barack Obama’s decision to partially unwind the Cuba sanctions program was driven by an understandable desire to relax that program. The comprehensive sanctions imposed against Cuba during the height of the Cold War helped contain what had been the most dangerous regime in the Western Hemisphere to America and its allies around the world. Yet following the collapse of the Soviet Union this threat — and the need to impose comprehensive sanctions that punished the Cuban people — diminished.

The Obama administration’s unwinding of sanctions was meant to empower the Cuban people by fostering civil society, increasing people-to-people contacts, and encouraging the development of the nascent Cuban private sector. The ultimate goal of this relaxation was to improve relations between the two countries and to set the stage for a peaceful democratic transition in Cuba.

But while certain U.S. businesses have increased their presence in Cuba and U.S. visitors traveling under general licenses authorizing people-to-people contacts (read: mostly tourism) have increased since 2014, the Castro regime has continued its long-standing practice of brutalizing its own people.

In March 2016, in the lead up to Obama’s visit, the Castro regime arrested more than 300 dissidents as part of a broad crackdown on opposition forces, according to Human Rights Watch. Likewise, over a seven-month period in 2016, independent observers received almost 8,000 reports of arbitrary detention. These recent examples build on decades of human-rights abuses by the Castro regime, including the killing of tens of thousands of its own citizens since it took power in 1959.

Further, the relaxation of sanctions has benefited many of the most odious elements of the regime. For example, the Cuban military keeps tight control over much of the tourism industry; U.S. hospitality companies that are attempting to build out the country’s tourism infrastructure provide the military with a substantial source of revenue. In 2016 for example, Starwood hotels, with explicit permission from the Obama Administration, began managing hotels owned by the Cuban military. Likewise, Gaviota, the military-run tourism company which already makes hundreds of millions of dollars off visitors every year, has significantly increased its revenue since the sanctions loosening, and aims to double the amount of hotel rooms under its control in the next three years, spurred in large part by U.S. visitors to the island.

It is time for the Trump administration to remedy these shortcomings. Imposing new, targeted economic restrictions could create more leverage to pressure the Castro regime to relax its oppressive behavior, as well as limit the ability of the regime’s most undesirable elements to fill their coffers. Any new prohibitions should prohibit U.S. investments and business partnerships with the Cuban military and security services — including Cuban companies owned by the military — under existing general license authorizations enacted as part of the Obama administration’s unwinding.  While such restrictions may not fully cut certain institutions within the Cuban government off from benefits associated with increased U.S. business in Cuba, they will limit how much profit these entities see.

In addition, to incentivize the regime to change its behavior, the administration should make clear that this new economic pressure will only be lifted if the Castro regime stops abusing human rights and cracking down on legitimate political and civil activities.

Despite alarmist arguments that the Trump administration’s re-imposition of certain sanctions is an ill-fated attempt to return to U.S. Cold War-era policies, this increase in sanctions pressure represents the smart use of American economic power. U.S. policymakers routinely adjust sanctions programs to ensure maximum effectiveness. Because the unilateral unwinding has significantly benefited the Cuban military and oppressive elements of the regime, it is perfectly appropriate to adjust this program to limit their ability to enrich themselves.

More broadly, the Trump administration appears to have learned one of the core lessons of recent sanctions-unwinding episodes: relieving certain sanctions pressure on rogues does not mean we need to give up all of our economic leverage. In the case of Iran, for example, providing sanctions relief as part of the nuclear deal does not mean we are hamstrung in using our economic power to combat Iran’s support for terrorism, and recent actions by the administration and Congress to target the Islamic Revolutionary Guard Corps illustrate that even in the post-JCPOA context, the United States can employ powerful economic tools against Iran.

So too in the case of Cuba. Providing sanctions relief to empower the Cuban people does not mean we should give up our ability to pressure the Castro regime. Hopefully the administration’s new Cuba policy is a step in this direction.

Eric B. Lorber, an expert on anti-money laundering policy and terror finance issues, is senior advisor at the Foundation for Defense of Democracies’ Center on Sanctions and Illicit Finance.