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By Andrew Holland on Mar 9, 2015 with 6 responses

Geopolitics of Energy Brings U.S. Back to Caribbean

800px-Map_of_the_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.

  1. By Gene Frenkle on March 10, 2015 at 5:27 pm

    Thank you for addressing this important issue. China is investing in the Caribbean while the U.S. failed to even help Puerto Rico during these last several years of high oil prices. The Caribbean people outside of Puerto Rico had great hope for Obama to help them and as far as I can tell he did nothing. The Americans that developed fracking ended up coming to their aid and I believe that if Obama acts now the Caribbean could have an economic renaissance basee on American tourism and cheap American energy!

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    • By TimC on March 11, 2015 at 11:25 am

      Cheap American energy is a threat to some parts of the Caribbean. Tiny Trinidad & Tobago is the world’s largest exporter of ammonia, most of it sold to the world’s largest importer of ammonia, the U.S. U.S. agriculture could not exist as it is today without cheap N fertilizers from T&T. But U.S. domestic ammonia production capacity is going to jump between 2015 and 2018 as new plants and new expansion projects come online to take advantage of low gas prices. The economy of T&T could be a casualty, as demand for their ammonia, methanol, and other chemicals fall off.

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      • By Andrew Holland on March 11, 2015 at 3:44 pm

        And at least three refineries set up to export to the US have closed, but I think that the benefit to Caribbean consumers overall will outdo the costs to a small set of producers.

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    • By Andrew Holland on March 11, 2015 at 3:43 pm

      Agreed – amazing to see how we’ve ignored the region in our backyard – maybe we’ll get back to work there.

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  2. By Forrest on March 11, 2015 at 7:11 am

    The politics of these Island states historically bash U.S. per needs of incompetent leadership skills to deflect criticism. The politics of blaming U.S. for the troubles is ever present especially if we start on a course of “helping” within government actions. They are very sensitive to our meddling, influence, and polluting culture. Also, U.S. politics of the Left can’t help themselves in attempting to buy influence in the region in hopes of gaining more Left leaning voters. They push for current territories to have full federal voting rights and representation in Congress and claim our country is racist otherwise since these islands made up of minorities. As far as alternative or conventional energy progress within these countries, U.S. business can do it alone and far more efficiently and quicker than some grand federal proclamation. I don’t think it’s a good precedent for U.S. to support welfare upon foreign soil. We have our hands controlling the spread and corrupting influence of such within our country. Establishing trade agreements and improving open markets for neighbors good as both trading partners win. Best to support cooperation for education, justice, and criminal suppression. We have agricultural interests and cooperation within the industry. Same could ensue with our power and fuel industries. Meaning to have avenues to easily trade ideas, business plans and cooperation. I would tread very lightly with high profile all powerful federal solutions.

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    • By Andrew Holland on March 11, 2015 at 3:46 pm

      A lot of the government help from the US side is really just facilitating private businesses. You’re right that the US government gets a lot of blame down there (maybe Cuba changes will help that), but hopefully if the private sector takes the lead here, that will stop some of the blow-back.

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