Key messages
- The US military intervention in Venezuela will have serious economic and political repercussions on Cuba.
- The fracturing of the strong links forged by Fidel Castro and Hugo Chávez could accelerate the demise of the Cuban regime.
- The crisis potentially precipitated by the Trump Administration’s oil policy could have more serious effects for Cuba than the fall of the Soviet Union.
Analysis
Introduction
Everything points to the US military intervention in Venezuela on 3 January 2026 being not an exception but a precedent and a warning to put pressure and threaten other governments, including that of Cuba, former President Nicolás Maduro’s main ally. Unlike his predecessors, Donald Trump does not distinguish between political regimes but between strong (China and Russia) and weak nations, which is how he views most of his neighbours to the south, now potential targets of his imperialistic zeal.
Starting at the turn of the century, Fidel Castro and Hugo Chávez sought an economic and political alliance that was given formal status in 2004 with the Bolivarian Alliance for the Peoples of Our America (Alianza Bolivariana para los Pueblos de Nuestra América, ALBA), led by both countries as an alternative to the Free Trade Area of the Americas (FTAA), which the US abandoned in 2005. The falling price of oil and the Venezuelan crisis led to the commercial value of these deals being reduced over the last 10 years. They continue being essential to the Cuban economy, however. US pressure on the Venezuelan regime could lead to the dismantling of its trade and financing arrangements with Cuba, though it is not yet possible to state with any certainty what will happen.
Cuba depends on the inflow of oil from Venezuela, Mexico and Russia. Now that the US has militarised the Caribbean sea lanes, controlling the passage of ships with threats of tariffs on actual and potential suppliers, less of the desperately needed oil is arriving. Even with the supplies that had been arriving there were blackouts lasting days at a time. Cuba lacks either the financial resources or the exporting strength to generate the currency needed to replace its purchases of Venezuelan oil on the international market; these supplies were arranged using specific agreements based on a political alliance, involving the export of medical and other professional services, an arrangement that is hard to replicate with other countries in the same quantities and financial conditions.
The loss of this inflow will aggravate the energy crisis and paralyse the greater part of transport, industry and services, entailing a significant contraction of Cuban GDP, greater inflationary pressures and an increase in the social cost of a crisis that has worsened over the last decade. The accumulation of economic and social tensions is intensifying because the Venezuela situation and the faltering supplies of fuel erode the possibility of managing the crisis while reducing the scope for governability.
Venezuela is home to the largest oil reserves in the world, one of the main justifications of Operation Absolute Resolve, but Cuba is devoid of strategic resources; nor is it a hub of the drug trafficking that blights the entire continent. How would Donald Trump justify a military attack on Cuba? Not with democracy, something to which he is indifferent. For the time being, Trump’s warnings that Cuba could be the next target are only preparing the ground for future negotiations, in line with his ‘life is a big deal’ slogan. The aim in what follows is to analyse the economic and political effects on Cuba of the change in government in Venezuela, which has left the US with greater leverage.
How much does the Cuban economy depend on its alliance with Venezuela?
Figure 1, using official data from the Cuban National Statistics and Information Office (ONEI), supplemented with the authors’ own estimates, gauges the importance of trade with Venezuela for the Cuban economy and enables an assessment to made of how this dependency has evolved over the last decade. The volume of trade in 2014, when bilateral relations reached their zenith, is compared to the most recent data available, relating to 2024.
Figure 1. Cuba: reduction of trade with Venezuela (US$ mn)
| Currency unit | 2014 | 2024 | % change 2014-24 | |
|---|---|---|---|---|
| Exports of goods to Venezuela | Dollars at current prices | 2,069.5 | 11.2 | -99 |
| Imports of goods from Venezuela | Dollars at current prices | 5,188.8 | 900.9 | -83 |
| Exports of services to Venezuela (1) | Dollars at current prices | 7,100.0 | 4,783.1 | -33 |
| Total trade with Venezuela (1) | Dollars at current prices | 14,358.3 | 5,695.2 | -60 |
| % of the total | Current prices | 45 | 31 | -32 |
| % of GDP | Constant prices | 20 | 9 | -55 |
The figures show that economic exchanges between Cuba and Venezuela in 2014 were exceptionally large for the dimensions of the Cuban economy and its international trade. Exports of Cuban goods to Venezuela exceeded US$2 billion, including a lion’s share of medications and pharmaceutical products. Imports of goods from Venezuela came in at over US$5 billion, dominated by the supply of oil and oil-based products.
The deficit in the balance of trade on goods was offset by the largest component of trade: the export of services, which accounted for around US$7.1 billion and chiefly comprised so-called professional services, predominantly medical. Altogether, bilateral trade exceeded US$14 billion in 2014 and accounted for around 45% of Cuba’s total foreign trade, close to 20% of its GDP, something that indicates the strategic nature of relations with Venezuela.
The figures show a significant decline in trade from that point on. Particularly striking is the almost complete collapse in Cuban exports of goods to Venezuela, plummeting 99%, which suggests that this component of bilateral trade has been virtually obliterated. Secondly, imports of Venezuelan goods, linked essentially to oil, fell by 83%. The Reuters news agency and the estimates made by the academic Jorge Piñón agree in suggesting that these volumes fell from around 90,000-100,000 barrels of oil per day (bpd) in 2015 to a much lower range of 32,000-35,000 bpd in 2024 and 26,000-27,000 bpd in 2025. The decline in volumes, together with the fall in the price of crude, would account for the contraction in current US dollar prices of a fundamental trade component.
Exports of services, by contrast, show a greater relative resilience, with a fall of 33% in the period. This suggests that Cuba-Venezuelan relations shifted towards an arrangement that was increasingly concentrated on professional services, something that emphasised their political nature and the difficulty of replicating them in other markets. As a result, total trade fell by 60% in nominal terms. Its share of Cuba’s total foreign trade fell from 45% to 31% and its share of GDP fell from 20% to 9%. Venezuela continues to be an economic partner of the utmost importance for Cuba, however, which highlights the external vulnerability of the Cuban economy to any additional disruption to these flows.
The indicators set out in Figure 2 show how the reduction in trade with Venezuela has had its repercussions on Cuba’s macroeconomic performance over the course of the last decade. These indicators enable a strong correlation to be made between the decline in bilateral trade and the deterioration of the main macroeconomic aggregates.
Figure 2. The decline of Cuba’s macroeconomy over the last 10 years (US$ mn)
| Currency unit | 2014 | 2024 | % change 2014-24 | |
|---|---|---|---|---|
| GDP | Constant prices in pesos | 52,184.0 | 50,693.3 | -3 |
| Inflation | % Dec/Dec | 2.1 | 70 (1) | 33.3 times |
| Fiscal balance | % current GDP | -2.2 | -7.3 | 3.3 times |
| Exports | Dollars at current prices | 17,812.0 | 9,513.3 | -47 |
| Imports | Dollars at current prices | 13,865.0 | 8,923.9 | -36 |
| Trade volume | Dollars at current prices | 31,677.0 | 18,437.2 | -42 |
| Trade balance | Dollars at current prices | 3,947.0 | 589.5 | -85 |
Figure 2 shows that Cuba’s GDP not only stopped growing but underwent a decline of close to 3% in the period, a performance marked by the collapse in economic activity from 2020. In parallel, there was a striking increase in inflation, owing in part to the monetisation of excessive fiscal deficits in a context of contracting output.
Internal imbalances have gone hand in hand with external ones. The figures point to a dramatic fall in exports, imports and total trade with the rest of the world. The 85% reduction in the trade balance is attributable to the fact that the Cuban economy has for several years been incapable of meeting its financial commitments to its creditors, foreign investors and international suppliers, prefiguring a situation of permanent financial default.
Another pertinent factor in Cuban macroeconomic dynamics and trade with Venezuela is the effect of sanctions, both on Venezuela and directly on Cuba. In the case of Venezuela, these were tightened in 2017 and, more decisively, in January 2019, when the US imposed sanctions on Petróleos de Venezuela S.A. (PDVSA), focusing the economic punishment on the oil industry and affecting the export capacity and arrangements to supply crude oil and fuels. In the case of Cuba, after a brief period of loosening during the Obama Administration, the sanctions were tightened under the first Trump Administration.
The Cuban economic crisis also reveals the failure of internal reforms. The transformations launched during the first government of Raúl Castro never went deep enough to have an impact on competitiveness, attract foreign investment in any sustained form or develop export sectors capable of offering viable alternatives to the alliance with Venezuela. In practice, the Cuban government insisted on trying to replicate the model of exporting professional services –mainly medical– to other countries.
Despite the growing participation of the Cuban private sector in internal and external commerce and in a range of service activities, it continues to face obstacles to its expansion (private companies can only employ a maximum of 100 workers). A large part of their currency and financial activities are conducted through informal channels owing to the national financial system’s crisis in currency liquidity. The majority of Cuban industries continue being monopolised by inefficient state enterprises and by an opaque business conglomerate (Grupo de Administración Empresarial S.A., GAESA) run by military institutions. All this translates into an accumulation of distortions that affect the productivity and competitiveness of business activity.
Cuba’s military-business machinery made a substantial commitment to tourism, devoting the larger part of its scarce financial resources to this end. Investment has focused almost exclusively on hotel construction, however, paying scant attention to other areas such as electricity and transport infrastructure, food production and the quality and stability of complementary services. Set against this backdrop, tourism has not managed to recover from the effects of the pandemic. Foreign tourist numbers fell by 20% in 2025 and the prospects for 2026 do not augur well. Nor has foreign investment served to cushion the Venezuelan shock. Sanctions and dwindling belief in the solvency and financial stability of the Cuban economic model, even among the Cuban regime’s international allies, has stalled the arrival of international capital.
The Soviet precedent and the risk of an amplified external shock
The possible obliteration of trade between Cuba and Venezuela and the abrupt cut in oil supplies are inevitably reminiscent of the way events unfolded in the 1990s, following the disappearance of the Soviet Union. The loss of its main economic ally was a severe blow to the Cuban economy at the time. A similar shock now would have highly adverse consequences, but with a fundamental difference: the initial economic, financial and institutional conditions are more unfavourable now than they were then.
At the end of the 1980s, Cuba’s infrastructure was less under-capitalised, with certain levels of financial reserves and inventory, and with a better stock of human capital. Moreover, the political leadership enjoyed greater internal cohesion and a degree of international recognition that is now non-existent. The economy would be obliged to confront the Venezuelan oil shock following several years of recession –in virtual free fall since 2020– and with profound imbalances in fiscal, monetary and external terms.
There is no public or verifiable information that would enable a reliable estimate to made of Cuba’s strategic oil reserves. The authorities do not release data about storage volumes. What is known, however, based on empirical evidence, is that operations are run on very tight margins. The blackouts, the reduction in electricity generation and the restrictions on transport suggest that there are no generous cushions of energy reserves that would enable the economy to keep going for any prolonged period without Venezuelan supplies. The pressure on other suppliers tends to raise the price and hinder the search for replacement sources, reducing still further the immediate prospects of restructuring.
The reduction or disappearance of trade with Venezuela would have similar effects to those observed in the 1990s, but amplified by the accumulated fragility and by the energy siege. There would be an additional fall in GDP, greater disruptions to the balance of payments, shrinking imports and exports, and a deterioration in the fiscal balance, with a widening deficit after a recent limited reduction. All this would have a devastating effect on household consumption, aggravating current levels of poverty and scarcity.
As occurred in the 1990s, an external shock of this kind would have consequences for monetary stability. Greater inflationary pressures are foreseeable, and an increase in the black-market exchange rate for an economy that has not managed to solve its inflation problems and in which the informal currency market continues to play a central role, despite the efforts of the central bank to reassert a degree of control. In these circumstances, the economic and social damage would be greater than that suffered three decades ago.
The foreign policy crossroads
Shortly after the military operation in Venezuela a jubilant Trump claimed it would not be necessary to intervene in Cuba, since what remained of the revolution would take care of its own collapse. The disastrous socio-economic situation was described by Marco Rubio as befitting a failed state. In so doing he seemed to revive, in a different context, John Quincy Adams’s Ripe Fruit doctrine, which postulated in 1823 that Cuba would automatically gravitate towards the orbit of the US.
Secretary of State Rubio, who is of Cuban descent, was for many years at the forefront of those Republicans and Cuban exiles who demanded the fall of the regime in Cuba, whether by the easy way or the hard way. Now the time may have come to put an end to the post-Castro single-party dictatorship, which is going through a time of historic decline. The Cuban crisis, just like its Venezuelan counterpart, has unleashed a mass exodus of citizens numbering around two million people. The closure of the sea lane between the US and Cuba is the only thing that has avoided another wave of boatpeople, as witnessed in the 1990s.
In political terms, the demise of Maduro and the advent of a Venezuela under greater US control have obliged the Cuban government to redirect its foreign policy. In the current scenario, the regime runs the risk of losing its links to the Bolivarian revolution without the possibility of finding ideologically likeminded partners in other regions. The current circumstances involve multiple risks for Cuba’s medical internationalism; the writing could be on the wall for Cuba’s so-called south-south projects, the ALBA initiative and the export of the revolution.
Meanwhile, Washington’s clear warning to China and Russia that the US continues to dominate –by force if necessary– its own backyard, especially Central America and the greater Caribbean, hinders the chances of Cuba broadening its relations with China, Russia and Iran. The regime therefore has few options left and runs the risk of getting isolated in a geopolitical void.
One potential ally for the government might have been its foremost trading partner and investor, the EU. The likelihood of the EU being prepared to challenge the US on the Cuban question is rather small, however, when it has more complex foreign policy issues to address, such as Greenland and Trump’s expansionism. The EU’s timid declarations in the wake of 3 January suggest little support for Cuba and its authoritarian government, which continues to receive criticisms in the European Parliament.
Cuba has few allies left in Latin America. Brazil could be a major political partner in a region that is divided against the US, but economically it provides no alternative to Venezuela. Financial relations have been tarnished by the accumulation of missed debt repayment deadlines. Mexico seems to be one of the main regional shock-absorbers on the energy front. President Claudia Sheinbaum seems to be inclined towards maintaining the supply of crude oil and fuels to Cuba. Sheinbaum also faces complex relations with Washington, however, and will need to negotiate a decisive challenge in the coming months: the compulsory review of the North American Free Trade Agreement (NAFTA), which is crucial for the stability of her economy.
The need to negotiate
In the new geopolitical scenario, the government will be obliged to seek some kind of negotiation. The problem is that it has historically shown little willingness to commit itself to significant economic and political changes as part of any deal. An apparent overestimation on the part of the political elite of its internal strength and Cuba’s international political status has undermined the rationality of its negotiating stance. Meanwhile, Donald Trump’s constant threats and pressure do little to lay the groundwork for a process of negotiation and dialogue.
Domestically, each passing day increases the chances of a resurgence of mass street protests like those of 11 July 2021. The government can halt them only by deploying police and security forces, and arresting hundreds of people, many of whom will end up swelling the ranks of political prisoners. This is a scenario that the government would clearly wish to avoid, in light of the Venezuelan precedent and Rubio’s desire to see regime change in Havana.
What future lies in store for Díaz-Canel’s government amid the prospect of further social breakdown and a return of protests? The US put a stop to migration in 2024 when it included Cuba, along with Venezuela, on its blacklist of countries with extremely harsh entry restrictions. The departure option that led almost two million Cubans to leave the island following the pandemic has thus been pushed to the margins. With the possibility of departure being so limited, all that remains is to protest against a regime that has induced profound economic and social deterioration, and that restricts political pluralism by means of persecution and prohibition of the opposition and demonstrations.
Díaz-Canel’s government could be next in the sights of Donald Trump, determined as he is to reconquer and subjugate what he deems to be his ‘home region’. A military attack on Cuba cannot be ruled out if it does not negotiate with the US. Trump has already suggested that the government should ‘make a deal, before it’s too late’, to which Rubio added: ‘If I lived in Havana, and I was in the government, I’d be concerned’. A military operation would face complex barriers of domestic legitimation –in the courts and in Congress–, however, insofar as it would be harder to sustain a casus belli based on verifiable links to drugs trafficking or the existence of a substantial economic or strategic interests that would justify the action within the parameters of US national security.
The capacity for Cuban resistance would be limited in the face of a potential US military attack, given the weakness of the regime and its disadvantage in equipment and technology, after the progressive weakening of the Revolutionary Armed Forces (Fuerzas Armadas Revolucionarias, FAR). Amid the hostility of its neighbour and in the wake of the failed Bay of Pigs invasion, prior to 1989 Cuba spent more than 6% of its GDP on defence. The fraying of its ties to socialist countries in the post-Cold War era led to a substantial fall of up to 2.88% of GDP, according to the most recent official figures (2018). Out of 50,000 service personnel, 80% belong to the army and only 8,000 make up the air force. Although military service is obligatory for men and there are territorial defence militias, it is by no means certain that large sections of the population would join an armed struggle to defend a revolution in outright decline.
The economic needs, the military threats and the geopolitical situation will at some point force the regime to negotiate possible ways out with Washington. When this happens, lifting sanctions to permit investments from the US and its powerful Cuban-American lobby could prove to be of mutual benefit without, in principle, jeopardising political stability. The release of political prisoners could be another gesture to dampen Trump and Rubio’s zeal, at little cost to the regime. Other concessions –such as moves towards democracy– are likely to be ruled out by the political elite because they incur substantial risks for a government with corroded legitimacy and little or no support.
In addition to releasing almost 1,000 political prisoners, an eventual negotiation could see the Cuban government creating opportunities for US companies to reconstruct a country whose infrastructure has suffered the destructive effects of almost seven decades of revolution, and the return of nationalised US assets, in exchange for lifting sanctions, including the extraterritorial Helms-Burton Act –enacted 30 years ago this year– and the Torricelli Act, which demands the return of property in US ownership prior to the revolution. Although the latter may be of interest to Trump and to part of the Cuban-American community he says he supports, the Díaz-Canel government has much less to offer than Venezuela’s.
Conclusions. the scenarios facing the regime
While international attention was shifting towards Iran and Greenland, the Cuban regime tried to win a little time by contemplating possible scenarios, rethinking its options and trying to determine its next move on the geopolitical chessboard. The 1959 regime saw off not only 13 US Presidents but also George W. Bush’s attempt to engineer democratic transition from the US by his appointment of a Cuba Transition Coordinator, who later fell into oblivion. The pressures on the Cuban regime can manifest themselves not only in the form of military threats, but also with financial and energy measures that attack its dependency on Venezuela and imported fuel. Although Cuba’s economic dependency on Venezuela has diminished, it continues to be significant and accounts for around 30% of Cuba’s foreign trade. Were this trade to fall further or cease, it would be extremely hard for Cuba to replace it. It would be impossible for the ‘doctors-for-oil’ arrangement to be replicated by other countries on a comparable scale. Nor is there an immediate domestic solution. There are no economic policies or reforms that, in the short term, could make up for an impact of such magnitude. Cuba would require international aid, whether from its traditional allies or in the form of negotiations with the US.
The most optimistic financial scenario involves the Venezuelan government using eventual talks to secure a loosening of sanctions and a lifting of the blockade on its tankers in exchange for commitments on the US interests underlying recent US military actions: access to oil, greater control of drug trafficking and a democratic transition; and ensuring that the US allows oil supplies to continue flowing in order to head off a humanitarian and migration crisis, pursuing the same political pragmatism as applied to Venezuela, one that prioritises stability over changing a chaotic and disorganised regime.
The most catastrophic economic scenario for Cuba would involve an immediate or precipitous withdrawal of its medical missions (the country’s main export) and shipments of oil. The supply of crude is subjected to additional difficulties owing to the blockade of tankers and threats to third-party suppliers. The Cuban economy does not have productive sectors with the competitiveness necessary to replace income accrued from exports of medical services, nor the currency reserves to buy oil on other markets. If supplies dwindle to nothing, the economy will be paralysed.
It remains to be seen what aid is forthcoming from Mexico, Brazil, Russia, China and the EU. Until now, financial aid has been negligible owing to the lack of belief in the economic model and its high rate of indebtedness. In the current international context –characterised by a more unpredictable US foreign policy that is detached from the norms of international law– it is likely that governments prioritise other interests and avoid taking on additional costs. Their own negotiations with Washington on trade and tariff matters, as well as their geopolitical and territorial priorities, may reduce their willingness to aid Cuba even further.
In light of what happened in Venezuela and may yet befall other countries, it is clear that in his second term Donald Trump has ditched being a Jacksonian isolationist in favour of shaping the world at his whim, with no sign of anyone standing in his way. For the time being, China and Russia have not protested unduly about the military operation in Venezuela. Brazil is in a minority position and the EU is formulating its stance on the US threat to seize Greenland, thereby attacking an ally and fellow member of NATO. In an eventual escalation against the Cuban regime, it is by no means clear that Havana could count on sufficient external support to dissuade or contain US pressure.
