Bloomberg: Trump Said to Announce Ban on Doing Business With Cuban Military

Bloomberg

https://www.bloomberg.com/politics/articles/2017-06-15/trump-to-announce-plan-to-roll-back-parts-of-cuba-thaw-on-friday?mc_cid=8923f453fa&mc_eid=5c57dc9deb

President Donald Trump will announce a ban on Americans and U.S. companies doing business with Cuba’s military on Friday in a rollback of the Obama administration’s plan to thaw relations with the island.

The president will announce the changes, which also block individuals from being able to plan their own educational trips to the island outside of tour groups and places new restrictions on where they can spend their money, during a speech Friday afternoon in Miami.

The new rules include a prohibition of financial transactions between Americans and Cuban companies affiliated with the country’s military or intelligence services, according to a senior administration official who requested anonymity to discuss the changes ahead of the president’s announcement. Those changes are likely to have a significant effect on U.S. travelers because of the dominant role in the Cuban economy occupied by Grupo de Administracion Empresarial SA, known as GAESA, a state-run, military-affiliated conglomerate.

The conglomerate owns almost all of the retail chains in Cuba and 57 of the mainly foreign-run hotels on the island. As part of Trump’s move, the U.S. State Department will create a list of Cuban entities with military ties so U.S. travelers know the establishments they are now expected to avoid.

“This new policy reverses the Obama administration’s support for the communist Castro regime and its military apparatus, and instead aligns the United States with the Cuban people,” according to a summary of his policy prepared by a congressional office and obtained by Bloomberg.

Travel Restrictions

The administration also plans stricter enforcement of rules mandating that trips to the island fall within one of 12 categories for legal travel to Cuba, including family visits and educational activities, according to the summary. 

The Obama administration relaxed requirements that educational groups travel with a guide from a U.S. organization sponsoring the trip. But the senior administration official described individually planned trips to the island as ripe for abuse of the still-existing prohibition on tourism, and said Americans seeking so-called “people-to-people” cultural exchanges would again need to book their travel through groups sanctioned by the Treasury Department’s Office of Foreign Assets Control.

While the new restrictions are likely to stifle some of the uptick in travel seen on the island since the Obama administration unveiled its new policy, Trump does plan to exempt port and airport fees from the GAESA ban. That means airlines and cruise ships should still be able to bring visitors to the island. Trump will also exempt banking transactions and fees, allowing Americans to continue to rent private properties such as those offered through AirBnB.

Ports Exempted

Cruise operators applauded the decision to exempt ports from the new restrictions. Carnival Corp. said in a statement they were “pleased” the changes will allow their ships to continue to sail to Cuba.

“We will review the extent of the tightening of the travel rules, but our guests have already been traveling under the 12 approved forms of travel" since the cruise line’s first trip there more than a year ago, the company said in a statement.

The changes drew swift condemnation from some activists who advocate a more open relationship between the U.S. and Cuba.

“This policy was clearly written by people who have never been to Cuba, at least not in this century,” James Williams, the president of Engage Cuba, a group that advocates for lifting the 55-year-old U.S. trade embargo, said in an emailed statement. “Because if they had, they’d know that the only thing that restricting travel will do is devastate Cubans working in the private sector who have relied on American visitors to provide for their families.”

Marriott International Inc. Chief Executive Arne Sorenson said on Thursday that the administration should recognize tourism as a useful diplomatic tool.  “It would be exceedingly disappointing to see the progress that has been made in the last two years halted and reversed by the administration,” Sorenson said in an emailed statement.

Rum and Cigars

Despite that frustration, the Trump policy notably leaves in place a number of the changes unveiled by the Obama administration.

There’s no change to the policy allowing U.S. travelers to bring home an unlimited amount of Cuban rum and cigars for personal consumption, the senior administration official said.

The policy also won’t limit remittances to Cuba by Cuban-Americans or end direct flights from the U.S. allowed under Obama’s policy. The U.S. embassy and detention facility at Guantanamo Bay won’t have to abide by the commercial restrictions, and expanded telecommunications and internet access programs will also be allowed to continue.

Trump also intends to exempt legal exports of agricultural commodities, medicines, and medical devices, as well as air and sea operations that support permissible travel, cargo, or trade, according to the congressional source.

Timing Uncertain

Moreover, none of the changes will go into immediate effect. Trump’s order simply instructs his administration to begin drafting new rules within 30 days, with no set timeline for completion.

And the administration will seek not to disrupt outstanding travel reservations or existing U.S. investment on the island as they draft the regulations, the senior administration official said. That could provide a reprieve for construction projects already under development in conjunction with GAESA, like Sheraton’s Four Points hotel in Havana.

The changes are “modest” Pedro Freyre, chairman of law firm Akerman LLP’s international practice and an adjunct professor at Columbia Law School, said in a phone interview.

“It tacitly accepts that the framework of the relationship with Cuba will be with diplomatic relations, with engagement, with conversations,” he said. Moreover, the changes provide some sense of certainty for businesses. “Business abhors the vacuum, and what we had was a vacuum of direction,” Freyre said. “Everybody was sitting on the sidelines waiting to see what would happen. Now we have a much clearer picture.”

Embassies Remain

Though the U.S. and Cuban embassies in each other’s countries will remain open, White House spokeswoman Sarah Huckabee Sanders said she didn’t know whether Trump would nominate an ambassador to Cuba. Trump also won’t reinstate the so-called “wet foot, dry foot” policy Obama ended that allowed Cuban immigrants who reached U.S. soil to remain in the country, a second senior administration official said.

Tightening restrictions on travel and trade with the communist nation loosened by his predecessor fulfills a campaign promise for Trump, who heavily criticized Obama’s decision to end a decades-long policy of economic and diplomatic isolation of the island.

Trump ordered the review of the policy in February, a third senior administration official said. That effort was led by National Security Adviser H.R. McMaster, who held a dozen meetings on the subject, including a session of the National Security Council’s principals committee on Tuesday. Trump and members of his team met with members of Congress interested in Cuba policy from both sides of the aisle, the official said.

Secretary of State Rex Tillerson told a meeting of the Senate Foreign Relations Committee that while the administration favored commercial engagement, Cuba should still face penalties for its poor record on human rights.

“If we’re going to sustain the sunny side of this relationship, Cuba must, absolutely must, begin to address its human-rights challenges,” Tillerson said.