More oil rumblings

There was an article last week in Brazilian media about Brazil’s Petrobras negotiating an oil exploration deal with Cuba. An account in English from the industry press is here.

This seems to be a case of less than meets the eye. The article is based on an interview with Fidel Rivero, a Cuban oil company official who says that “we are going to change the history of the island” by exploiting Cuba’s Gulf reserves. The negotiations with Petrobras are in the final stages, Rivero says, but one of the items still to be resolved is Petrobras’ share of the proceeds (“rate of return” is the term he uses), which would seem to be a central issue. Maybe that’s why he says he hopes to see an announcement “in the coming months.”

On the home front, left-of-center blogs are playing a game of gotcha with Republican politicians who declare that China is drilling for oil in Cuban waters. Columnist George Will and Vice President Cheney made that claim a few weeks ago, but corrected themselves promptly.

Here are the blogs’ hits on Rudy Giuliani, Senator Norm Coleman, and Congressman Mike Rogers. Of course they’re right that China is not drilling in Cuban waters, so the “Red China drilling off our shores” scare tactic doesn’t hold water.

But Chinese companies could drill there, as could companies from any other country, save the United States. The candidates’ inaccurate claims about China don’t change the fact that in the coming years, we’re likely to see additional drilling in Cuban waters, at locations closer to Florida’s shores than Florida would allow in areas it controls.

There are four policy issues that arise. First, Vice President Cheney was right: in this case, the communists are doing more to increase supplies than we are. Second, because of the Administration’s aversion to talking with the Cuban government, the United States is doing nothing to deal with the risk to our own marine environment. Third, if Cuba becomes self-sufficient in oil, or an oil exporter, its relationship with Venezuela would no longer be economically crucial. And fourth, if that were to happen, it would be very hard to argue that U.S. sanctions could be an instrument to force political change in Cuba.