Geopolitics of Energy Brings U.S. Back to Caribbean
In the United States, too often we think of the Caribbean as a very nice place to visit. Throughout our history, though, it has been far more important. Last week, ASP released a report looking at the unique challenges of energy security in the Caribbean. This will be the first of a series of articles showing the challenges faced in the region by energy insecurity, why that is important, and give some solutions.
The islands of the Caribbean have always been too small to control their own geopolitical destinies – they are blown by winds far from their shores: colonialism, slavery, or the Cold War.
Around the Caribbean was where the Monroe Doctrine, designed to keep Europeans from interfering in the Americas, was tested throughout the nineteenth and early twentieth centuries. It was where the U.S. first learned that it could be a regional and then global power on the world stage.
Cuba provided the background for many of these scenes. The explosion of the Battleship Maine in Havana’s harbor to the Rough Riders’ charge up San Juan Hill during the Spanish-American War brought overseas territories to the U.S. Cuba, too, was where the American influence in the Caribbean saw its most significant overreach, as support for the corrupt Bautista government brought Fidel Castro to power, and brought Soviet influence and Soviet nuclear weapons to within ninety miles of American shores.
Even into the 1980s, the Caribbean was central to American foreign policy, with the invasion of Grenada, the controversial support to the Contras in Nicaragua, and the invasion of Panama in 1989. Fear of Cuban influence played into all of these interventions.
Since the fall of the Soviet Union, the Caribbean has featured in American foreign affairs only as an object lesson for how a small but determined lobby can maintain a failed policy (the Cuban embargo). This inattention has been bad for the islands of the Caribbean and bad for the United States. As our geopolitical gaze has looked to faraway battlefields in Afghanistan, Iraq, and beyond, we have failed to cultivate relationships with the leaders and people of the islands. For too long, Americans have thought of the Caribbean as a nice place to visit or as a victim to be helped, as in the case of Haiti after the 2010 earthquake.
While no one would argue for the U.S. to return to a military-led foreign policy in the region, American absence from regional partnerships constitute a failed opportunity to invest in the economic growth of the islands. Today, the region finds itself dependent on the vagaries of international energy prices and the goodwill of a larger neighbor: Venezuela. Venezuelan foreign policy (thinly disguised as economic policy) has stepped into the vacuum left by American inattention with the PetroCaribe program. This subsidy program provides fuel oil at subsidized rates directly to Caribbean governments, who then use it to generate electricity and to fuel their cars.
The effect is that consumers and businesses throughout the region pay prices for electricity that are among the highest in the world, while governments receive a subsidy that allows them to buttress their budget in other areas. However, it is not clear that such a generous subsidy program is sustainable, given Venezuela’s ongoing economic, political, and budget crises. If Venezuela were to abruptly end PetroCaribe, as may happen, all of the PetroCaribe countries would suddenly have to pay market rates to import oil. Though not technically part of PetroCaribe, Cuba is also part of a similar program. Even though oil prices have fallen significantly, countries like Jamaica or Haiti are dependent on PetroCaribe for up to 4% of their GDP and 10% of their government budgets.This dependence is why Scotia Bank analyst (and former ASP Adjunct Fellow) Rory Johnston calls PetroCaribe “More Noose Than Lifeline.”
Meanwhile, the U.S. is in the midst of an energy revolution. Record increases in natural gas and oil production are allowing the U.S. to think about how to use its newfound bounty. This energy revolution is not limited to fossil fuels, though, as the cost of installed solar power has dropped rapidly, wind power approaches grid parity in some places, and Americans have never been more efficient in how they use energy. These changes allow American policymakers space in which to use their newfound energy confidence as a tool of geopolitics – and this tool can be helpful in the Caribbean.
On January 26th, US Vice President Joe Biden’s speech at the Caribbean Energy Security Summit announced that the islands of the Caribbean have an opportunity to enhance their energy security, and the US will help them to make it happen. America’s newfound energy strength has provided the U.S. with the confidence to reassert itself in a region long thought as its backyard. This will be good for Americans and for the region.