Beyond the Embargo: A Toolkit for Squeezing the Cuban Regime

Opponents of U.S. sanctions often cite Cuba as “Exhibit A” for why sanctions don’t work. The United States has maintained an embargo on the island for more than six decades — but to what end? Cuba’s communist regime remains in power, run by a corrupt clique of military and party insiders who continue to loot the economy while ordinary Cubans endure fuel shortages, daily blackouts, and rationed food. The critics have a point, but they are misguided.

The problem is not that the embargo went too far. It is that it has not gone far enough.

For 65 years, the embargo has prohibited American investment in Cuba while leaving the door open for everyone else. Spanish hotel chains went into business with the Cuban military, Canadian miners partnered with state monopolies, and European banks cleared billions in profits. Meanwhile, Chinese telecommunication giants engrained themselves in Cuba’s internet infrastructure while Venezuelan dictators Hugo Chavez and Nicolas Maduro exported $63.8 billion in oil to Cuba over the last quarter century, with Havana selling 60 percent of its Venezuelan oil to China in recent years to generate hard currency.

This status quo is now being broken.

On May 1, President Trump signed a new executive order, Executive Order (EO) 14404, that significantly broadens the scope of U.S. sanctions to target the regime’s key business partners abroad. Whereas U.S. sanctions on Cuba used to only prohibit Americans from dealing with the island, the new executive order now makes foreign persons, companies, and banks operating in Cuba’s most lucrative sectors face a binary choice: continue propping up the regime or potentially be sanctioned and cut off from the U.S. dollar.

The choice should be an obvious one.

Between 40 and 70 percent of Cuba’s entire economy — spanning tourism and hospitality, minerals and mining, financial services, retail, ports, and logistics — is controlled by one opaque military-linked conglomerate, Grupo de Administracion Empresarial S.A. (GAESA). The State Department estimates GAESA holds as much as $20 billion in hidden assets, with revenues likely exceeding three times the revenue of Cuba’s official government budget. While ordinary Cubans endure rolling blackouts and food shortages, the regime’s military holding company is the island’s largest and most profitable enterprise. Every major foreign partner doing business in Cuba is, in some way, doing business with GAESA.

That is why, on May 7, the State Department sanctioned GAESA along with its top executive and the regime’s largest joint mining venture, Moa Nickel S.A (MNSA). Both were already on the U.S. sanctions list, but prior designations only restricted Americans from dealing with them. Redesignating GAESA and MNSA under EO 14404 extends a new and unprecedented sanctions risk to the foreign companies and banks that these major cash-generating revenue sources are dependent on.

Until now, U.S. sanctions on Cuba functioned as a primary embargo, meaning they restricted what Americans could do but not counterparties abroad. The Helms-Burton Act of 1996 added some bite by authorizing visa bans for Cuban executives and lawsuits by U.S. persons against foreign companies that traffic in property expropriated by the regime. But the act stopped well short of the financial penalties that define modern U.S. sanctions programs.

EO 14404 closes the gap.

Foreign firms operating in Cuba’s energy, defense, metals and mining, financial services, or security sectors can now be sanctioned and their assets blocked by cooperative financial institutions. Foreign banks that process significant transactions for any party sanctioned under EO 14404 now risk losing access to U.S. markets. Treasury set June 5 as the deadline for foreign companies and banks currently exposed to GAESA and any of its majority-owned subsidiaries to divest and discontinue their activity. After that, the enforcement clock starts.

Here is what should happen next:

Force Transparency on GAESA’s Ownership and Control: Given GAESA’s opacity, the administration should begin publicly listing entities under its ownership and control. Treasury’s “50 Percent Rule” means that any entity of which GAESA owns 50 percent or more is automatically blocked and to be treated as sanctioned, even if it isn’t named. But GAESA’s opacity may complicate efforts by companies and banks to divest from such entities and freeze their funds, which is required to avoid sanctions risk. The administration should therefore specifically name the entities known to fall within the scope of the 50 Percent Rule and pair those efforts with targeted outreach to financial institutions believed to be involved in facilitating past or ongoing dealings with GAESA.

Entities like Cuba’s state-owned telecommunications company, Empresa de Telecomunicaciones de Cuba S.A. (ETECSA), warrant particular attention. ETECSA appears to be partially owned by GAESA but has not been sanctioned by the United States. It is implicated in censoring internet access throughout Cuba and has strong links to Chinese digital repression tools. Chinese companies such as Huawei, ZTE, and TP Link are Cuba’s major providers of internet and telecommunications infrastructure, directly supporting ETECSA’s operations. If ETECSA were to be specifically sanctioned under EO 14404, these firms would be subject to U.S. sanctions themselves.  

Specifically naming these entities now and conducting targeted outreach to banks operating in strategic sectors of the Cuban economy will help limit any attempts to move funds into other accounts held by individuals or entities that are known to be tied to GAESA but not already sanctioned. Treasury should also sanction any GAESA subsidiaries that fall below the 50 percent threshold but provide direct or indirect support for Cuba’s military, intelligence, or security services.

Target the Cuba Restricted List: Additional pressure on the Cuban regime can be exerted by utilizing EO 14404 to sanction any entities already identified on the State Department’s list of companies under the control of, or acting for, or on behalf of, the Cuban military, intelligence, or security services — known as the Cuba Restricted List (CRL). This would expose much of Cuba’s GAESA-linked tourism sector to the new sanctions and accelerate large-scale unwinding of commercial dealings from foreign firms such as Spain’s Melia Hotels, which has worked alongside the regime for decades to run dozens of luxury hotels and villa properties on the island. Designations on May 7 and May 18 included several, but not all, entities on the CRL.

Cut the Regime Out of Remittances: GAESA generates significant revenue from its ownership and ties to Cuba’s FINCIMEX, which handles remittances to the island. Remittances rank among the Cuban economy’s top sources of hard currency — totaling an estimated $2 to $3 billion annually — and FINCIMEX takes a cut of every dollar that moves through its network. U.S. sanctions should seek not to cut off the flow of funds to ordinary Cubans, but to the government. In years past, when dealing with Venezuela’s Maduro regime, the U.S. government partnered with Circle, issuer of the U.S.-dollar backed cryptocurrency stablecoin, and the Latin American exchange Airtm to route aid directly to Venezuelan health care workers, bypassing Caracas’s financial controls entirely.

A similar program should be launched now to deprive the Cuban regime of remittance-related revenue while ensuring funds reach ordinary Cubans. Any potential roadblocks to adoption should be studied by the Treasury Department, perhaps in consultation with the President’s Working Group on Digital Asset Markets, and quickly mitigated as much as possible.

Sanction Cuba’s Medical Missions: The State Department can also leverage EO 14404 and other sanctions authorities, such as the Global Magnitsky Act, to target one of the regime’s most important sources of funds: medical missions. These programs, which send thousands of Cuban medical professionals abroad pursuant to contractual agreements with host countries, generate much of Cuba’s estimated $6 to $8 billion in annual revenue from the export of professional services. These programs have engaged in documented human rights abuses, including forced labor, with some human rights organizations calling Cuba’s medical missions a form of slavery.

The Trump administration issued a factsheet last year warning of human trafficking concerns related to Cuban medical missions, but State should go further and add them to the prohibited sectors of the Cuban economy under EO 14404. This would allow Treasury and State to more credibly use the threat of sanctions to incentivize countries to end their dealings with these programs.

Revoke Visas and Green Cards for Regime-Linked Individuals: The State Department should more aggressively utilize its authorities to rescind visas and green cards held by individuals living in the United States who maintain professional or familial ties to the regime. On May 21, U.S. authorities arrested Adys Lastres Morera, a green card holder and the sister of Ania Guillermina Lastres Morera, the executive president of GAESA. Secretary of State Marco Rubio terminated her permanent resident status, classifying her presence as a national security threat. ICE confirmed she had been living in Florida while aiding the Cuban regime, including managing tourist rental properties in Havana. More regular enforcement against similarly situated individuals, particularly those whose activity within the United States appears to involve regime-linked commercial activity, would help to deprive the Cuban government of funds and access to the U.S. financial system.

Support Private Rights of Action via Helms-Burton Title III: The Trump administration should support businesses that seek to hold accountable third parties dealing in assets expropriated by the Cuban regime. An estimated $1.9 billion in property held by U.S. individuals and companies before the Cuban revolution has been expropriated, with those properties now valued at approximately $9 billion and providing ongoing revenue to the regime. On May 21, the Supreme Court held in Havana Docks Corporation v. Royal Caribbean Cruises that a U.S. company could pursue damages from cruise lines that operated at port facilities expropriated by the Cuban regime — opening a pathway to hold third parties liable for trafficking in confiscated U.S.-owned property under Title III of the 1996 Helms-Burton Act, which grants U.S. nationals the right to sue foreign companies that profit from stolen American assets.

The Trump administration can support these suits in several ways: by preserving that right to sue — a power presidents can suspend at will, as every administration from Clinton through Biden did before Trump broke with that precedent in 2019 — and making clear it will not be reimposed during Trump’s tenure; by directing the Justice Department to continue filing briefs in Title III cases, including the still-pending Exxon Mobil v. Corporacion CIMEX, which will determine whether Cuban state-owned companies can be sued directly; by tasking the Foreign Claims Settlement Commission — the federal body that certifies American property claims against foreign governments — to reopen a claims program for those whose confiscated property was never formally certified, which would expand the pool of eligible plaintiffs; and by working with Treasury’s Office of Foreign Assets Control to ensure that any existing Cuba-related licenses issued under the legacy Cuba sanctions program cannot be read as legal cover for companies profiting from confiscated American property.

Conclusion

The critics who say sanctions have not worked on Cuba are right about one thing: the embargo, as it existed for over six decades, has not delivered on its promise. It restricted Americans while leaving European hoteliers, Canadian miners, and Chinese telecom firms free to keep the regime afloat. If implemented effectively, EO 14404 will be the first U.S. policy to meaningfully close that gap.

The toolkit above gives the administration the roadmap to leverage and build on that new authority. It can help turn a limited embargo into something the Cuban regime has never actually faced: comprehensive economic isolation.

The regime’s revenue base is contracting, and its foreign patrons now face real risks that they never did before. A sustained economic and diplomatic pressure campaign, as described above, will help the Trump administration bring about a new Cuba. Whether this moment produces change depends entirely on whether Washington follows through.

Max Meizlish is a research fellow at the Center on Economic and Financial Power (CEFP) at the Foundation for Defense of Democracies (FDD). He previously worked in the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), the agency primarily responsible for developing and implementing U.S. sanctions. Connor Pfeiffer is senior director of government relations at FDD Action and a former policy advisor in the U.S. Senate and House of Representatives who focused on Western Hemisphere and international economic issues. For more analysis from Max and CEFP, please subscribe HERE. Follow FDD on X @FDD and @FDD_CEFP. Follow Max on X @maxmeizlish. Follow Connor on X @connorpfeiffer. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.