Obama Administration Announces Further Loosening of Sanctions Against Cuba

Wall Street Journal

By: Felicia Schwartz

The Obama administration moved Friday to loosen more restrictions on doing business with Cuba, opening up more travel to the island, expanding telecommunications and allowing some Americans to establish offices and bank accounts there.

Treasury Secretary Jack Lew said the actions, set to take effect Monday, build on regulatory changes implemented in January and demonstrate U.S. commitment to promoting change in Cuba.

The regulations aim to simplify travel to the island and help pave the way for U.S. businesses to do business on-site with Cuba's growing independent entrepreneurial class, senior administration officials said.

Under the new policies, cruise ships and cargo ships can go to Cuba without a special license, helping to accommodate rising demand for travel from U.S. to the island, officials said. U.S. citizens traveling to the island for journalistic or humanitarian work or to carry out professional research can now bring close relatives with them.

U.S. individuals and businesses will be able to open up bank accounts in Cuba and Cuban citizens can open bank accounts in the U.S. American businesses can also legally have a presence in Cuba and open up offices, warehouses and storefronts.

The new rules also ease restrictions on telecommunications companies and Internet-based service providers to make it easier for them to conduct business on the island. They also remove limits on remittances to Cuban nationals and to the amount of money U.S. citizens can bring to the island.

While Friday's steps are significant, Congress must act to fully lift the trade and travel embargoes. Businesses are likely to be cautious about how much they invest in Cuba as long as there is uncertainty about how the policy will fare beyond 2017, when President Barack Obama leaves office. Lawmakers supportive of the shift hope looser regulations will increase pressure from U.S. companies on Congress to pass legislation that further loosens restrictions, or scraps them altogether.

"This is tremendously helpful," said Sen. Jeff Flake (R., Ariz.), a co-sponsor of a bill to lift the travel embargo and a supporter of normalization. "Once these changes happen nobody seriously moves to change them or turn back the clock. So at some point with some of the changes, members of Congress will simply say 'we're just going to adjust our policy to match the reality and the reality is Americans are doing business in Cuba.'"

Officials cautioned that the effect of the looser regulations depends partly on buy-in from the Cuban government.

"The changes we are announcing today will in fact have impact, but they can have even greater impact if the Cubans take additional steps on their part," a senior administration official said.

Friday's actions came partly in response to suggestions from companies trying to do business on the island since some restrictions were loosened earlier this year. They have told the U.S. government they would like to see Cuba allow for greater investment and for the private sector to flourish. U.S. companies also can't import directly into the country but must go through the Cuban government, another policy they'd like to see Havana change, the official said.

Critics of Mr. Obama's engagement with Cuba said further loosening regulations was misguided and would bolster the Castro regime.

"These new regulations are another desperate attempt to ignore the iron grip that the Castro regime maintains on the island's economy and will only serve to benefit the coffers of the regime," said Rep. Ileana Ros-Lehtinen (R., Fla.).

Sen. Marco Rubio (R., Fla.), a 2016 Republican presidential candidate, said loosening regulations wouldn't help Cubans. He faulted the Obama administration for easing U.S. policy toward Cuba without reciprocal actions from Havana.

Supporters of the policy shift welcomed the looser regulations.

"It's especially important to see steps toward opening up market engagement in telecommunications and internet services, as we believe the increased flow of information and communication is the lifeblood of a modern economy," said Jodi Bond, a vice president for the U.S. Chamber's International Division who oversees the Americas.

Augusto Maxwell, a partner at Akerman law firm in Miami who advises companies looking to do business in Cuba, said the changes lay the groundwork on the U.S. side to broaden business ties but would take time to take effect.

"It's going to take two governments to do this," he said.

Other supporters said the loosening of regulations would show Cuba that the U.S. is serious and committed to moving ahead with normalization. "We're putting the onus on Cuba, not the other way around," said James Williams, president of Engage Cuba, a group lobbying to end the embargo.

President Barack Obama and Cuban President Raúl Castro said in December that Cuba and the U.S. would move to normalize ties after decades of Cold War enmity.

Since then, Havana and Washington have restored diplomatic ties and travel from the U.S. to Cuba has jumped. Mr. Obama has taken several steps to loosen the trade and travel embargoes on his own, but only Congress can act to fully lift them. That is unlikely to happen in the Republican-led Congress before Mr. Obama leaves office in 2017, though Republican support for his policy is growing.

The Obama administration is hoping to chip away at the embargo before the president leaves office and is working on further loosening of trade and travel restrictions beyond those announced Friday, officials have said. A civil-aviation agreement to resume commercial flights is expected to be completed by the end of this year.

Administration officials hope to advance the policy shift with Cuba enough unilaterally that it will be untenable to reverse it in future administrations, officials have said.

Mr. Castro plans to attend the United Nations General Assembly in New York this month. The U.S. and Cuban governments haven't said if Messrs. Obama and Castro would meet on the sidelines. Pope Francis' visit to the U.S. will also increase pressure on lawmakers to take steps to lift the embargo. The pontiff helped broker the historic shift in relations and is likely to call for an end to the embargo when he visits the U.S. next week after a trip to Cuba.