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Free Ride’s Over: Mexico Trying to Get Cuba to Pay for ‘Donated’ Oil
The Mexican state-owned Petróleos Mexicanos (Pemex) oil company is evaluating ways to start charging Cuba for the multimillion-dollar oil shipments Mexico has been donating to the island nation’s communist regime, Bloomberg reported Tuesday.
The decision reportedly stems from rising oil prices, as prices head towards the $100 barrel mark, as well as Pemex’s and Mexico’s own fiscal deficit problems. Mexican far-left President Andrés Manuel López Obrador’s government has so far donated over a million oil barrels in “humanitarian aid” to the Castro regime during 2023.
López Obrador is a vocal ally of the Castro regime. The Mexican president awarded the Castro regime’s figurehead president Miguel Díaz-Canel this year with the Order of the Aztec Eagle, the highest decoration that Mexico awards to foreigners.
Cuba continues to undergo a severe fuel shortage, one of the many symptoms of the continued systematic collapse of the nation and the inhumane living conditions that Cubans have been subjected to after six decades of communist rule have left the country in ruins.
For the past two decades, Cuba has depended on consistent oil shipments from Venezuela’s socialist regime to cover its local demand as part of the agreements signed between late dictators Fidel Castro and Hugo Chávez in the early 2000s. Venezuelan oil shipments to Cuba have significantly decreased in recent months as Venezuelan oil exports to the United States, which the regime profits from, have steadily increased thanks to oil sanctions relief granted by the administration of President Joe Biden last year.
According to information from the Mexican port authority and ship movements tracked by Bloomberg, the Mexican government sent 350,000 barrels of Pemex-refined oil as donations to Cuba in June and an additional 700,000 barrels in July. Both shipments are estimated to have been worth $77 million total, according to average Mexican oil prices estimates in those two months.
June and July’s shipments marked Mexico’s first oil exports to Cuba since 2019. Mexico did not renew oil donations to Cuba during August.
Reuters reported on Tuesday that Pemex’s six oil refineries in Mexico are struggling to boost its oil refining output and are presently operating at barely half their capacity, which in turn is forcing Mexico to import fuel to supply its local market.
By August, Pemex’s crude oil processing amounted to nearly 797,000 barrels per day (bdp), down from last year’s 816,000 bdp. When it comes to gasoline, however, Pemex was only able to produce 242,000 bpd in August, marking the month with lowest output levels in 2023 so far. Pemex’s crude oil processing output has been progressively dropping for the past 15 years.
Pemex is also considered to be the most indebted oil company in the world. Pemex’s short-term debt has exceeded its own cash resources since 2020 and the company’s debt liabilities have surpassed $110 billion as of June.
The drop in crude oil and gasoline output has forced Mexico to increase its fuel imports by 17 percent last month. Coupled with Pemex’s own severe fiscal deficits, this has reportedly prompted the country to evaluate the possibility of charging Cuba for the oil it had so far been giving away for free to the communist Castro regime.
“Why not? We have to see how it can be, what kind of transaction,” Mexican Foreign Minister Alicia Bárcena said in an interview in New York during her participation at the United Nations General Assembly. “We have a financial situation, of course. It’s not easy to donate.”
Bloomberg stated in its report that it will not be easy for Mexico to sell oil to Cuba due to the existing U.S. sanctions imposed on the communist regime. Bárcena explained that any kind of measure that the Mexican government decides to carry out on the subject would have to avoid violating U.S. sanctions.
Bárcena explained that the oil donations to Cuba were made through the Mexican Agency for International Development Cooperation but, as crude oil prices have increased by up to 25 percent over the past three months, in addition to Mexico facing its largest fiscal deficit in more than three decades has forced the country to find new sources of income to offset is growing deficit and alleviate the pressure that the oil donations to Cuba represents to the Mexico’s public finances.
Mexico’s 2024 budget project, presented this month, expects a deficit of nearly 1.7 billion Mexican pesos ($96.5 million) for next year, an amount that is equivalent to 4.9 percent of the country’s GDP. Mexico has not experienced a deficit of this nature since 1989.
Christian K. Caruzo is a Venezuelan writer and documents life under socialism. You can follow him on Twitter here.
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