US Fuel Exports to Cuba's Private Sector Create Black Market Amid State Crisis

An exception in the long-standing U.S. trade embargo is allowing American fuel to be sold to Cuba's private sector, creating a nascent capitalist market on the island for the first time since its refineries were nationalized in the 1960s. The development has sparked a chaotic and expensive black market, providing a lifeline for some private enterprises while exacerbating a severe energy crisis for the general population.

A Tale of Two Economies

A U.S. Commerce Department rule permits the export of fuel to private Cuban businesses, bypassing the state. This has led to the import of 900,000 barrels of U.S. fuel between February and May, a small volume that nonetheless has a significant impact, according to a Reuters report. The fuel powers generators for private restaurants and shops, and supplies vehicles for private taxis and retailers.

This has given rise to a sprawling resale market where prices have soared. At its peak this spring, gasoline on the black market reached an astonishing $10 a liter ($38 a gallon). The new market operates openly, with sellers using social media and WhatsApp to advertise fuel stored in apartments and backrooms. While providing relief to those who can afford it, the system starkly highlights the island's growing wealth disparities. The average state salary of about $10 a month puts these prices far out of reach for most Cubans, who face a collapse in public transportation and rolling blackouts.

Government Response and Market Reforms

In response to the energy shortages, the Cuban government has initiated economic reforms. In June, lawmakers approved measures to open the energy sector to private and foreign investment. Prime Minister Manuel Marrero Cruz announced in late July that the first foreign investment venture for importing and selling fuel on the island has been approved, though the company was not identified.

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Nearly 200 Cuban businesses have received permits for wholesale fuel distribution to other private companies. However, the government has not yet approved private retail sales, and all imports must still pass through state-owned ports and storage facilities controlled by U.S.-sanctioned entities. Private firms pay these state entities a service fee of about 11 cents per liter, according to Havana-based consulting firm Auge.

Sanctions, Risks, and an Uncertain Future

The arrangement presents significant compliance risks for U.S. businesses. American export rules require that the fuel be used only by the private sector and not end up with the Cuban government. However, experts note a lack of monitoring.

• Jorge Piñon, a Cuban energy expert at the University of Texas at Austin, stated that while the policy looks good on paper, "there’s no monitoring of whether people follow through" with the restrictions.
• A U.S. State Department spokesperson said Washington recognizes Cubans' humanitarian needs and that private entities are permitted to import fuel, but did not address the impact of U.S. policy on the black market.

Cuban President Miguel Diaz-Canel has decried the U.S. embargo as a "genocidal siege" and asserted that recent economic reforms are not meant to please Washington. For now, the trickle of U.S. fuel is preventing a complete economic paralysis but continues to entrench deep inequalities across the island.