Obama Talks to Castro, Chips Away at the Cuban Embargo

President Barack Obama smiles as he walks on the South Lawn of the White House on September 3. Yuri Gripas/Reuters

The United States announced new rules on Friday to further ease trade, travel and investment restrictions with Cuba, but Cuban President Raul Castro told President Barack Obama that Washington should go even further and lift its economic embargo on the Communist-ruled island.

The rare phone call between the two leaders followed the unveiling of changes that will allow certain U.S. companies to establish offices in Cuba, expand banking and Internet activities and eliminate limits on the amount of money that can be taken there, U.S. officials said.

Despite Castro's appeal, the broader 53-year-old U.S. embargo will remain in place, and only Congress can remove it - something majority Republicans are considered highly unlikely to do anytime soon.

Aides to Obama touted the latest steps, which he implemented with his executive powers in defiance of critics in Congress, as a way to boost business and promote economic and political reform in Cuba. They also mark Obama's continuing effort to chip away at the embargo since a thaw.

Critics of Obama's detente slammed the move as another reward to Cuba with no corresponding concessions from Havana, especially on the human rights front.

The changes, while significant, stop short of allowing across-the-board investment by U.S. companies or general U.S. tourism, activities banned under the embargo itself.

They come as Washington and Havana inch toward normal relations after more than half a century of hostility that followed Cuba's 1959 revolution. The two countries restored diplomatic ties and reopened embassies earlier this summer.

Speaking for the first time since their historic meeting in Panama in April, Obama and Castro discussed ways to advance the normalization process, including steps they "can take together and individually," the White House said in a statement.

In a separate statement released almost simultaneously in Havana, the Cuban government said: "President Raul Castro stressed the need to deepen the reach (of the new regulations) and to eliminate definitively the blockade policy, for the benefit of both countries."

Both governments lauded Pope Francis for his role in facilitating rapprochement late last year between the two former Cold War foes. The pope will visit Cuba this weekend before heading to the United States next week.

Set to take effect on Monday, the new U.S. regulations build on others Obama announced in January to begin lowering economic barriers with Cuba.

"A stronger, more open U.S.-Cuba relationship has the potential to create economic opportunities for both Americans and Cubans alike," U.S. Treasury Secretary Jacob Lew said.

Obama's term ends at the start of 2017 and his unilateral steps to loosen the embargo also appear aimed at advancing normalization with Cuba far enough that any future Republican president would be unable to reverse it.


U.S. officials said the full impact of the eased restrictions will depend on whether Cubamakes economic reforms of its own. Some White House aides have privately accused Havana of dragging its feet on such changes for fear of losing its grip on the state-run economy and Cuban society.

Castro's government, while working to improve ties, has repeatedly made clear that full normalization will require complete lifting of the embargo and the return of the U.S. naval base at Guantanamo Bay on the eastern tip of the island.

The initial reaction from the American business community was cautious. U.S. companies have shown interest in exploring opportunities in Cuba, but many executives remain wary of the risks. The two countries' outstanding legal claims against each other remain a key source of uncertainty.

Bacardi, the world's largest privately held spirits maker, was among the most successful companies in Cuba before its Cuban assets were seized by the government and its founders exiled in the 1960s.

The company said on Friday it was "way too early" to talk about any possible return to the island. "We will need to wait and see what the impacts are," Bacardi said in a statement.

American Express (AXP.N) said it was "planning on initiating business activities in Cuba" but said it did not have a timeline.

Seth Eisen, a spokesman for MasterCard (MA.N), said: "People (are) starting to think about the market, and it will take time for the infrastructure to develop, from phone lines to Internet access to the terminals themselves."

Sprint Corp (S.N) said it would expand mobile-phone roaming service to Cuba. But Starbucks Corp (SBUX.O) said it had no plans to enter Cuba.

Critics accused Obama of making concessions to a country that was not reciprocating.

U.S. Senator Marco Rubio, a Cuban-American lawmaker and a Republican candidate for next year's presidential election, said "President Obama's eagerness to please the Castro regime knows no bounds."

But Senator Jeff Flake, one of several Republicans who have publicly backed the opening to Cuba, told Reuters: "Anything that makes it easier to do business in Cuba and to assist Cubans who are trying to work outside the state structure is a good thing."

Under the rules released by the U.S. Treasury and Commerce Departments, certain companies can establish subsidiaries or joint ventures as well as open offices, stores and warehouses in Cuba. They also allow for telecommunications and Internet services between the nations.

Although the regulations do not change who can travel to Cuba, the rules do ease movement of authorized travelers by licensing transportation providers.

The regulations also abolish the cap on remittances and allow the travelers to open and maintain bank accounts there. But it keeps in place prohibitions on any of those funds going to the Cuban government or Communist Party officials.