Overview
The United States expanded the scope of its sanctions on Cuba this month, creating a broad risk of exposure for third-country entities and exacerbating the country’s ongoing fuel crisis. Cuba’s economy is at its lowest point in decades amid restrictions on foreign energy imports. The island’s energy grid has repeatedly collapsed in recent months, resulting in nationwide blackouts, and Havana recently announced that the island’s fuel supply has run out. The new sanctions regime now covers any foreign companies and institutions engaging in transactions involving Cuba. The risks for international businesses have already forced companies to recalculate, with Toronto-based Sherritt pulling out of a mining joint venture on the island.
Cuba’s energy crisis intensified after the US capture of Venezuelan President Nicolás Maduro in January and the ensuing cut-off of Venezuelan oil shipments. The cut-off was followed by an effective energy blockade, including an executive order authorizing tariffs on any country exporting oil to Cuba, which halted shipments from other energy partners like Mexico. In March, Russia challenged the US blockade by sending a shipment of over 700,000 barrels of crude oil to Cuba’s Matanzas Bay aboard the Russian-flagged Anatoly Kolodkin tanker. US President Donald Trump said that he allowed the tanker to arrive for humanitarian reasons, and White House Press Secretary Karoline Leavitt stated that future decisions regarding similar shipments would be made on a case-by-case basis. Those supplies offered short-term relief, lasting only through the end of April.
Beijing has positioned itself as an ally of the Cuban Communist Party and invested in the country’s solar energy capacity, once again positioning the island as a pressure point amid global power competition. As US intelligence-gathering operations near Cuba have increased in recent months, CIA Director John Ratcliffe visited the island on Thursday, warning Havana to shut down Chinese and Russian intelligence posts there and to implement economic reforms. Ratcliffe is the highest-ranking official of the Trump administration to visit Cuba.
The New Sanctions Regime
On May 1, President Trump issued Executive Order 14404, which widened the scope of US sanctions on Cuba to a similar degree as those applied to Russia and Iran. This expanded sanctions regime applies to any foreign person who operates in or has operated in the energy, defense, mining, financial services, or security sector of the Cuban economy. This broad scope can be applied to foreign companies that exchange goods or services with Cuban companies, or foreign companies that deal with Cuba’s central bank. Sanctions also apply to any foreign person engaged in transactions with the Cuban government or any other individual sanctioned by the EO, and to financial institutions that process or facilitate such transactions. Third-country entities engaged in sanctionable activities could be subject to asset freezes and restrictions on access to the United States.
Previously, sanctions on Cuba primarily applied to Cuban persons or entities and prohibited engagement by US persons and entities. While Cuba was already included on the State Sponsors of Terrorism list, with some previous measures extending the application of US sanctions on Cuba to foreign actors, many non-US entities remained insulated from the sanctions regime. While financial institutions often err on the side of over-compliance by avoiding transactions with Cuban entities, the latest secondary sanctions create a modern sanctions authority with much wider risks for global companies.
On May 7, the US Department of State designated the Cuban military conglomerate GAESA under the new sanctions regime. GAESA, an umbrella enterprise operating across major domestic sectors, is estimated to control up to 40% of the Cuban economy, with $20 billion in illicit assets and annual revenues triple the size of the entire Cuban state budget. It is not subject to audits, but an investigation by the Miami Herald uncovered a trove of classified financial statements, revealing its massive capital reserves. GAESA was established during the “special period” (Cuba’s severe economic recession in the 1990s following the collapse of the Soviet Union) by the Cuban Armed Forces. The conglomerate is state-owned, overseeing retail, service industries, financial institutions, and hospitality. GAESA’s executive president Ania Guillermina Lastres Morera was also blacklisted under the new sanctions. GAESA’s sprawl across multiple major industries creates potential liabilities for foreign companies investing in practically any sector of the Cuban economy, although OFAC will not target foreign persons winding down transactions with GAESA before June 5.
The May 1 sanctions expanded on the January 29 Executive Order 14380 entitled “Addressing Threats to the United States by the Government of Cuba,” in which Trump declared a national emergency with respect to Cuba and leveraged tariffs to impose an oil blockade on the island. US sanctions on Cuba go back to the enactment of the Cuban Assets Control Regulations (CACR) of 1963. The regime has evolved over the years, creating a patchwork of overlapping regulations. The Helms-Burton Act of 1996 included limited secondary sanctions relating to confiscated private property. The Act also codified the US embargo on Cuba, removing the President’s authority to unilaterally lift it.
China Quietly Supports Cuban Energy Transition
Ahead of Trump’s state visit to China this week, Beijing urged Washington to end the embargo on Cuba, declaring support for the Cuban communist government. China has increasingly sought to expand its strategic presence in the Western Hemisphere, investing in diplomatic ties and infrastructure across Central and South America. Cuba’s foreign minister Bruno Rodriguez visited Beijing in February, and the two countries have expanded cooperation in energy, infrastructure, and technology in recent years. China has invested millions in off-grid solar energy infrastructure to help the island withstand fuel shortages. Chinese exports of solar panels to Cuba reached $117 million in 2025, up from just $3 million in 2023. Cuba has an agreement with China to construct 92 solar parks across the island by 2028, with the goal of producing a capacity of 2 gigawatts of power. The first officially opened in early 2025, with approximately 50 solar parks now operational. Renewable energy now fills 10% of Cuba’s electricity demand, up from 4% in 2024 and on track to meet a 24% target by 2030.
The United States has increasingly sought to contain China’s influence in the region, with the “Donroe Doctrine” reasserting US regional dominance in the Western Hemisphere. However, in contrast to Venezuela, US interest in exerting influence over Cuba is more ideological than economic. President Trump has repeatedly stated his intention to oversee a political transition in Cuba during his second term in office, although this could take either the form of a negotiated economic liberalization or a further strangling of the Cuban regime. While Trump has hinted at the possibility of military action toward the island, the political cost of further extending US forces abroad would likely make this approach untenable.
Cuba Balances Defiance and Appeasement
US talks with Cuba have been led by Secretary of State Marco Rubio, who has called for Cuban President Miguel Díaz-Canel to step down. Further talks have reportedly taken place between the Trump administration and Raul Castro’s grandson Raul Guillermo Rodriguez Castro, known as Raulito or El Cangrejo (The Crab). CIA Director Ratcliffe met with Raulito and top Cuban intelligence officials during his recent visit. While Raul Castro stepped down as Cuba’s president in 2018, the Castro family remains the ultimate power broker on the island. Rubio has said that he has made private offers to the Cuban government for the US to provide humanitarian assistance, including satellite internet. The State Department publicly restated the US offer to provide $100 million in direct assistance to the Cuban people, reporting that the Cuban government rejected previous offers. The offer comes after Rubio met with Pope Leo in the Vatican, and the proposed aid to Cuba would be distributed in coordination with the Catholic Church.
Cuba has balanced taking a defiant stance toward the US with making gradual concessions. In April, Cuba announced the release of more than 2,000 prisoners, although none were political prisoners. The release of political prisoners is central to US negotiations with Cuba. Reports have indicated an increase in US intelligence-gathering flights off the coast of Cuba in recent months, as Díaz-Canel vowed a guerrilla resistance campaign in response to any potential US military action against the island. While the US economic pressure campaign seeks to isolate Cuba’s authoritarian leadership, the crisis exposes ideological divisions within the region. Mexico and Brazil joined Spain in denouncing US pressure on Cuba at a summit in Barcelona in April.
Geopolitical tension and sanctions risk have already driven foreign companies to begin severing operations in Cuba. Canada’s Sherritt International Corp. ended its activities in Cuba following the announcement of the new measures. The mining company, which was one of the largest foreign investors on the island, is already taking steps to repatriate personnel, as three directors resigned from the company’s board. Sherritt’s Cuba partner Moa Nickel SA was directly designated in the State Department’s May 7 press release. It is yet to be seen how widely the US will enforce the new measures, with an OFAC general license authorizing transactions that are prohibited by the recent EO but exempt under CACR. However, the mere prospect of enforcement will have far-reaching implications for global businesses as they seek to limit their exposure. The US will likely designate further foreign entities in the coming weeks. While the expanded US sanctions on Cuba have had the desired effect of further isolating the island from global trade and investment, the deeply entrenched Communist government has continued to divert remaining resources to repressing dissent and maintaining power on the island. In the absence of a major catalyst for change, the status quo will likely continue as global investors over-comply with the sanctions regime to minimize risk.
