The Dizzying Highs and Terrifying Lows of Living Off Somebody Else's Oil



My first post for is up on their site now. Behold:

It’s easy to lose sight of just how central Venezuela’s oil largesse has been to the Cuban state’s financial strategy. Following a landmark 2003 “Cooperation Agreement,” Venezuela has been sending 115,000 barrels a day to the island. The Cubans re-export some of the crude that Venezuela sends them to other countries, pocketing some $765 million in 2014. That’s a vital source of fresh dollars for an island that doesn’t have a lot of other good options for earning hard currency.

But surely that’s a fraction of the value of the Venezuelan oil deal to Cuba: The much bigger piece is getting the island’s whole energy import bill more or less paid for. Without Venezuelan shipments, Cuba would have to scrounge up billions in foreign currency it doesn’t possess to pay for the oil it needs to keep buses and trucks on the road and power stations running (at least some of the time). When you figure in those savings, you see that Venezuela’s oil was worth more than $3.6 billion to the Cuban treasury in 2014. 

Caracas Chronicles is 100% reader-supported. Support independent Venezuelan journalism by making a donation.


  1. “Apart from tourism, the only source of Cuba’s foreign income in the same league as Venezuela’s oil freebies is the remittances Cuban exiles in the U.S. send back home, which have been estimated at an impressive $3 billion in 2014.1”

    Just to add some missing information in your article:

    Brazil is paying about $700 million dollars per year to Cuba to ‘import’ Cuban doctors, besides building Infrastructure worth $1 billion+ (new Mariel port).


  2. Good article! I think you have gotten the Cuban macro economic calculations quite right, and probably the thinking behind that planning, too.

    The only thing I missed was a dismissive comment about how Cuba purportedly “pays” for that oil largesse through a doctor transfer. While Venezuelans know better, some readers will think you have unfairly left that programme unmentioned.

    • From the Guardian: “Covering Venezuela as a freelance foreign correspondent from 1999 to 2003, he reported for the Washington Post, the New York Times and the Financial Times, and was Editor of English Language Content at VenEconomy, Venezuela’s leading bilingual business magazine. Since 2002,
      he has run Caracas Chronicles, an English-language blog on all things Venezuelan. He is currently a doctoral candidate in political science at the University of Maastricht in the Netherlands.”
      Venezuelan-check (as far as I know, not seen cedula)
      Political Scientist-check
      Blogger- You figure it out!

      • Yes, as is my Venezuelan wife – a Canadian citizen, that is. Just because one has had the opportunity to obtain citizenship from a country other than the country of your birth, does not make you any less a native son or daughter and patriot. Quico = Venezuelan = Check!

  3. Good article, but I still detect some escualidismo in you outlook. Namely, you describe it like its a bad thing! Cuba gets more tourists, Cubans lives improve, Castro holds power but accepts more oversight and nudges further away from single part control, Venezuela is no longer on the hook to provide cheap oil.

    The only losers are extremists or fundamentalists, US republicans who hate Cuba as a dogma even though they might have trouble finding it on a map were it not right next to the US. Miami gusanos who lose there stranglehold on Florida’s electoral votes. Izquierdistas trasnochados across the Patria Grande who lose an excuse to support a dictatorship in the name of anti-imperialism. Oh, and “free market” fundamentalists in latin america who can’t bear for Cuba to get by without allowing itself to be wholesale purchased by multinationals.

    Obama, I’m starting to believe in your change again

  4. It’s an interesting analysis. I have some things I don’t get in your math though:

    Shouldn’t the value of the yearly subsidy just equal #barrels/year x price per barrel? How do you compute the subsidy?
    For instance for the second column, 115 mbpd x $50 pb x 365 dpy = $2.1 billion. How do you compute the $1.9 billion number? For the second column I get 300 days per year from the subsidy you report, but for other columns I get much different numbers. Perhaps my calculator is broken…
    How do you compute “total costs”?

    I am guessing the cubans are hoping for a mulitplier effect, each dollar of foreign investment results in growth beyond the immediate effect. Question is with all the remaining trade conditions and government restrictions this might not be impressive. The cuban regime has to learn from chavismo and abandon its dead-end policies.

    • I repeat that, since I messed up the column labels:

      Shouldn’t the value of the yearly subsidy just equal #barrels/year x price per barrel? How do you compute the subsidy?
      For the hypothesis 1, 115 mbpd x $50 pb x 365 dpy = $2.1 billion. How do you compute the $1.9 billion number? For hypothesis 2 I get 300 days per year from the subsidy you report, but for other columns I get much different numbers. Perhaps my calculator is broken…
      How do you compute “total costs”?

  5. Something seldom noted is that according to the cooperation accord prices of ven oil sent to cuba are subject to a discount which rises the more the price of oil rises beyond a certain threshold so that if prices fall to the $40/50$ price range the discount pretty much dissapears . Whats important is that Cuban provision of various ‘services’ to Venezuela (some totally redundant other like the provision of medical technicians notionally more useful) are priced so high so that when what Cuba is owed is tallied against what Venezuela is owed cuba comes out ahead or only owes Venezuela a relatively small amount.

  6. Read it.

    It’s a nice article. I would have liked to read more about the politics: how an aging government succeded in becoming the pimp of a much more powerful and rich nation? Did the Venezuelans know of the negotiations, or found out in twitter?

    Personally, I like your Kenya article better than this one but I think it is good for you, to publish in that site.

  7. ……and the not insignificant operating, transportation and backhander costs of freeby oil are at the expense of Venezuela. Or put a another way the oil sales which reach the Venezuelan coffers have been significantly discounted in order to pay the operating costs, genuine and otherwise, of more or less free and debt payment oil.

    • “Igualmente, para minimizar las pérdidas de PDVSA y el contrabando de gasolina, sugiero que la revaluación venga acompañada de un aumento del precio de la gasolina a Bs. 4 el litro (o US$ 0,5), lo cual pondría el galón de gasolina a un precio más internacional (US$ 1,9), sin que se cause inflación ni conmoción social.”

      This is recommended on Aporrea? I’m surprised.

    • Eudes obviously lacks ambition. If we simply adopted the average income of citizens of Monaco as our minimum wage, why we’d become the wealthiest nation in the world! pegging the bf to the swiss franc, we’d take care of inflation in one swing. What are we waiting for!!!

  8. One of the many tragedies is that Venezuela is not attracting tourists to mitigate the effects of its own plunging oil revenue. A direct flight from the frigid wastes of southern Ontario in the winter to Caracas, is no longer an option even for the crazy.

    • And everybody knows the reasons, among others, there’s some little thing called unleashed omnicidal crime here in Venezuela.
      But, with the right conditions, tourism serves as another opportunity to diversify this country’s income.

  9. It isn’t just the Ven oil subsidy to Cuba, it’s: the electrification of Havana; a Ven-Cuban submarine data/IN cable; the Venezuelan Cedula contract; the import of food to Venezuela via off-loading to Cuban vessels with over-pricing/commissions; over-priced soon-to-expire Ven imports of Cuban medicenes; Ven exports of Ven-produced medicenes to Cuba under the guise of Barrio Adentro; over-priced payments for Cuban medical “doctors”/sports trainers/ military-intelligence operatives; and who knows how many other billions of dollars yearly to Cuba via Venezuelan Presidential/off-budget projects/freebies.

    • I was in Puerto Cabello back in May 2013 and a Turkish Captain of a Panamanian ship asked me to try and help with problems he was having with delays and cargo theft. His cargo was bagged cement which had been loaded in Cuba. He let me look through the bills of lading and other cargo documents and I just about shit when I saw the price that was being charged. By my quick internet searches and asking commodity traders I know, we figured it was some of the most expensive cement every produced in the world that was being off-loaded onto Pequiven. And the contract called for some 800,000 tonnes of this. Who knows how much the Cubans scammed off of this and other sales of food, medicine, etc., etc., etc.

      • Yes, and there’s the medical equipment Venezuela purchases from Cuba which Cuba buys elsewhere. I am sure there must be an excellent reason for that…

    • The Chavernment figures that whatever the GOV pays Cuba is cheap considering the real payment from Cuba: not physicians for the Misiones, but DI/G2/DGI assistance in keeping Chavismo in power. Such as surveillance of the Internet.

  10. Some years ago I learned of a transaction which involved buying trucks from brasil through a cuban govt agency by the Ven Army using Pdvsa funds for distribution to Psuv electoral organizations . Cuban intermediation involved paying a very substancial surcharge which the Cubans Kept for themselves . Later Ive learned that there have been many other transactions involving cuban intermediation which replicated the above scheme . Cuba has been bleeding venezuela a dozen different ways throughout the years .

    There are many different ways in which the Regime has been organizing international purchases and other transactions so that the Cuban Regime is benefited without contributing in any real way to the transaction.

    The subsidised oil supplies are only one way in which the Venezuelan govt has fed cuba with funds and income which under ordinary conditions it would not have been able to recieve .

  11. Yeah, but why?

    I understand Chavez’ love for Fidel, but why thousands of high and middle-placed Venezuelan officials decided to be subalterns of foreign, ignorant, greedy colonials?

    Why hundreds of Venezuelan military men gave their dignity and started obeying foreign authorities?

    Why thousands of students rejected Venezuelan academic tradition and started believing a poor, backward island had more to offer than their own country?

    Why hundreds of Venezuelan doctors acquiesced into relinquishing their professional monopoly to foreign crackpots with poorer training and education than them?

    Why millions of Venezuelan patients decided to see these crackpots are helpful and their own doctors as enemies?

    To me all this is mind-boggling.

    • Good question. I have been wrestling with that same issue for some time now. I can only conclude that for some reason we got the peasants of the peasant immigrants. I could be wrong and no doubt will be told so.


Please enter your comment!
Please enter your name here