The United States and Cuba Begin Restoring Relations

The United States and Cuba on Dec. 17 took their most assertive step in several decades toward normalizing relations. The most important announcements concerned the resumption of high-level political discussions focused on renewing formal diplomatic ties between the countries, which have been nonexistent since 1961. Cuban and U.S. officials will hold high-level meetings in the coming months, and the two countries will work toward establishing embassies in Havana and Washington. The United States will also immediately relax some sanctions on trade and travel to Cuba. President Barack Obama announced that the United States would loosen certain restrictions on financial transactions with Cuba, remove some restrictions on U.S. citizens traveling to Cuba, and authorize the export of certain goods to the Cuban private sector. The U.S. State Department will also review Cuba's designation as a state sponsor of terrorism. Obama has the legal authority to immediately implement the measures he announced, but he left the issue of formally lifting the trade embargo up to Congress. Together, the announcements signaled a gradual process of reopening Cuba to the United States.

Havana has much to gain from starting such a process, especially at a time when its regional partner, Venezuela, faces severe instability. Cuba fears that a declining Venezuelan economy will limit one of the island nation's sources of financing and low-cost petroleum shipments while it is attempting to transition toward a new leadership and economic model.

However, a formal end to the embargo is a long way off. The United States' Cuban Liberty and Democratic Solidarity Act of 1996 requires visible progress toward Cuban concessions such as liberalizing political activity, holding free elections and dissolving state security bodies. Nonetheless, the measures announced by Obama will allow the administration to deepen ties with Havana before it approaches Congress to request the lifting of sanctions. Talks between U.S. and Cuban officials will continue into the next year, with the April summit of the Organization of American States serving as the largest public forum at which the two sides can meet. Given Cuban President Raul Castro's advanced age, it is likely the talks will discuss an eventual political transition in the country.

A more immediate question is how the budding rapprochement between the United States and Cuba will affect the behavior of Venezuela, Cuba's most important ally in Latin America. Cuba shares intelligence with Venezuela, enabling Caracas to detect threats from within the country — though at the cost of fomenting discontent within the Venezuelan armed forces. While Cuba's rapprochement with the United States may not immediately change Caracas' relationship with Havana, Venezuela's mounting economic distress and potential for unrest may make it see Cuba's improved ties with the United States as a potential threat in the long run.

Ultimately, Venezuela's future will rely on global oil prices and Venezuelan President Nicolas Maduro's ability to simultaneously manage unrest on the streets and from challengers within the government. The coming year will be a critical one for Maduro, and he is looking for any lifelines that could provide an economic reprieve. With Cuba openly engaging the United States, Maduro may have an additional incentive to seek his own rapprochement with the United States. In fact, several hours after the U.S.-Cuba prisoner swap was announced, Maduro publicly said Venezuela would be willing to improve its stagnant political ties with the United States.

Maduro would not be starting from scratch. Earlier this year, he designated an ambassadorial nominee to the United States and held discussions — albeit inconclusive ones — with Washington to restore normal diplomatic relations. Over the past year, several reports emerged that Caracas was negotiating the resumption of direct counternarcotic activities with the U.S. Drug Enforcement Administration, though no deal has been reached yet. These discussions could be renewed as a result of today's agreements between Cuba and the United States. 

Restoring relations with the United States will not solve all of Maduro's problems, however. Venezuela's plummeting economy and its negative impact on the ruling United Socialist Party of Venezuela is largely the result of long-term structural problems that cannot be easily reversed. It is highly unlikely that Maduro will be able to address these problems without incurring major political costs. Consequently, restoring political ties with the United States will depend more on domestic factors than moves from Obama or a subsequent U.S. president.

Regardless, today's developments signal the first step in a long process of reconciliation. While the details of the rapprochement have yet to be solidified, Obama's announcement sets a clear goal for U.S.-Cuban relations, one that could have broader implications throughout the region.

Read more: The United States and Cuba Begin Restoring Relations | Stratfor