With Cuba’s economy in tailspin, its leader makes big bet on Putin during Kremlin visit

As he stood next to President Alexander Lukashenko of Belarus during the military parade to mark Victory Day at the Kremlin in Moscow last week, Cuba’s Miguel Díaz-Canel was the only leader from the Western Hemisphere at the event, a reminder of the island’s isolation in so openly supporting Russia, the country that has invaded its neighbor, Ukraine.

Vladimir Putin had been sworn in for his fifth term as president two days earlier at the grandiose St. Andrew Hall in the Kremlin, in a ceremony designed to recall Russia’s imperial past. Against that backdrop, Cuba’s leader’s visit to Moscow had one purpose: to play the role of the loyal subject who expects some favors in return.

“This visit is taking place at a very challenging time for the Cuban revolution,” Díaz-Canel said in a meeting with Putin at the Kremlin after the parade on May 9. “We are facing maximum pressure from the U.S. government. We will hold on and will continue to defend our social and economic progress. But we are doing this amidst very challenging and hard conditions. So, we would like to share views on this situation with you as our friends and brothers.”

In recent years, as the island’s economy has collapsed under Díaz-Canel’s watch, Cuba has again become a subordinate state in Russia’s orbit. The Cuban leadership’s expectation: that Putin will provide a lifeline to keep the communist island afloat, keeping it from having to implement further market reforms or improving relations with the United States, which hardliners fear would jeopardize their grip on power.

The renewed alliance has created some unprecedented sights, even for a country aligned for decades with the Soviet Union during the Cold War.

On May 9, while Díaz-Canel attended the traditional Victory Day’s “Immortal Regiment” parade in honor of the fallen in the Great Patriotic War, as World War II is known in Russia, a few hundred Russians also marched in Havana’s Fifth Avenue, in the posh Miramar neighborhood that is home to several foreign embassies, for the first time in the event’s history.

Then, later that day, Díaz-Canel dispensed with the caution that made Cuba abstain in some of the early United Nations votes that condemned Russia’s invasion of Ukraine last year to show Putin he is willing to go much further.

“The Russian Federation can always count on Cuba’s support. We wish you and the Russian Federation success in conducting the special military operation,” he said, using the phrase Moscow prefers for its war on Ukraine.

In a podcast recorded on his flight back from Moscow, Díaz-Canel defended the visit, spoke of “important” business projects and said Putin had shown “a commitment” to help Cuba.

For all the fanfare, however, Putin has yet to deliver in any major way.

The days when the island received billions of rubles in Soviet subsidies are long gone, as Russia is under heavy sanctions by Western nations and involved in an expensive war.

A Russian oil shipment valued at $60 million finally arrived in Cuba at the end of March — after a streak of electrical blackouts on the island that led to protests — but only after a senior Cuban official, Vice Prime Minister Ricardo Cabrisas, traveled to Moscow and secured a loan. In a long interview with a Spanish left-leaning journalist and activist published Wednesday, Díaz-Canel said the island had not received any diesel or fuel oil since October.

“When the President of Cuba is standing at the Kremlin alone, basically hoping for Putin to have a hole in his pocket and money falls out, it’s not a good look,” said John Kavulich, the president of the U.S.-Cuba Trade and Economic Council, who regularly tracks the business climate in Cuba. “They are desperate.”

But for a government unable to feed its population or keep the lights turned on, begging for money has increasingly become central to its survival. And every little bit counts.

Living on donations

With an expected 18% deficit in its national budget this year, the Cuban government is increasingly dependent on donations, foreign aid programs and debt forgiveness.

A look at stories in state media reflects the reality: The United Arab Emirates donated $50 million to ship food from Brazil to Cuba. Japan’s development agency used $20 million to fund a local electrical energy project in the Isle of Youth. It also gave $3 million to UNICEF to deliver ultrasound machines and other medical equipment to the island. The European Union donated 300,000 euros to alleviate the situation of those affected by heavy rains in March. The list goes on.

For the first time, the government even requested aid from the United Nations’ World Food Program to give powdered milk to Cuban children.

In plain terms, Díaz-Canel admitted that the Cuban state, which owns the land, the island’s natural resources and most companies, is living paycheck to paycheck.

“Today, we are a country that lives off the current account, that is, what you earned this week and how you distribute it among a tremendous amount of priorities that the country has that cannot be covered with the income of a single week,” he said in an interview published Wednesday in Granma, the Communist Party daily.

As Díaz-Canel was flying back from Moscow, the Cuban peso, currently one of the most rapidly devaluating currencies in the world, hit a historic low, at 400 pesos to the dollar. Monthly state pensions currently amount to less than $4 a month.

Holding off market reforms

The Cuban government blames all of its troubles on the decades-old U.S. embargo and other American sanctions. But at the center of Cuba’s crisis is the government’s reluctance to privatize the economy at a larger scale, particularly in farming, even as hunger is becoming an issue for the most vulnerable. According to official data, the country produced 67% less food in 2023 than five years before.

Though most farmland is leased to private farmers and cooperatives, they depend on the government for fuel, fertilizer and seeds, and must sell part of their crops to the government at capped prices. The land parcels are also small in size, preventing large-scale farming. Marabou weed, an invasive species, covers many previously cultivated areas.

Last year, the government promised Russian business leaders it would extend them favorable long-term leases of land for farming and other uses. Yet Cuban leaders have misread Russia´s appetite for investing in a sinking economy, said Kavulich.

“Other than low-margin tourists from the Russian Federation visiting the Republic of Cuba, government-to-government donations, and provision of loans (which will undoubtedly soon require payment rescheduling, write-offs, or forgiveness as in previous decades)” Russian companies have not found “demonstrably and sustainably profitable entry points in the Republic of Cuba,” he wrote on his blog Cubatrade.

Kavulich’s license to invest in a private enterprise in Cuba, the first of such authorizations by the U.S. government, is set to expire this month. He wasn’t able to use it because Cuba has yet to issue regulations authorizing foreign investment in its emerging private sector, which now encompasses more than 10,000 companies. He stressed that such regulations are critical to attract interest not just from American companies but from investors elsewhere.

Some Cuban Americans are also pushing for foreign investment in these private enterprises, known in Spanish by the acronym mipymes, which were first approved in 2021. The issue came up during an event with Cuban government officials and representatives of American food exporters this week in Havana, said former U.S. Rep. Joe García, who was in attendance. García, who also holds a U.S. Treasury Department authorization to invest in a private enterprise in Cuba, said the Americans in the audience were there to expand their businesses with the private sector, “the only thing that is working there right now.”

The Cuban government keeps fending off calls for more market reforms from friends and foes alike. In the Granma interview Díaz-Canel insisted the private sector is just “a complement” to state enterprises in a centrally planned economy. But many believe the situation on the ground will eventually force the government to open up the socialist economy.

Visitors who have traveled recently to the island described seeing more homeless people and senior citizens begging for food on streets full of potholes and where garbage piles up on street corners.

“Cuba is at its worst,” a Cuban-American who does business in Cuba and requested anonymity for fear of reprisals told the Miami Herald. “It is worse today than during the Special Period,” he added, using the name Cuba gave to the grave economic crisis that hit the island in the 1990s after the fall of the Soviet Union.

“They have no economic way out,” he added. “ I don’t see the light at the end of the tunnel if there is no privatization of state companies.”