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Cuba's power grid is collapsing. No, it's not because of US sanctions or socialism. This ongoing crisis can be blamed on Cuba's lack of investment into modernizing and its reliance on Soviet and Venezuelan fuel.
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Peter Zeihan argues that Cuba's electrical grid collapse results from structural economic dependence on Soviet then Venezuelan oil subsidies, not socialism or US sanctions, and the crisis creates a unique political opening for US-Cuba cooperation on manufacturing and energy.
- Cuba's grid was designed pre-1950s, burns inefficient oil, and hasn't received meaningful maintenance in 50 years
- Loss of Venezuelan fuel supply (from 300,000 to 25 barrels/day) combined with inability to access US markets means Cuba cannot replace lost energy infrastructure
- Hurricane Oscar and grid failure create first fluid political environment since 1990s, enabling potential bilateral cooperation on manufacturing where Cuban labor costs (5-10% of US wages) could attract reshoring
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From the Cuban Missile Crisis through the 1980s, the Soviet government essentially subsidized Cuba's existence by covering food imports, energy imports, machine tools, equipment, and providing advisors in exchange for military assets including listening centers, making Cuba dependent on Soviet economic support to function as a modern state.
“Cuba basically exist because the uh Soviet government paid for them to exist covering pretty much all of their food imports from their energy Imports as well as all their uh machine tools and equipment and providing them with a lot of advisors in exchange for military assets of especially listening centers in Cuba”
Cuba's backup power system consists of diesel generators distributed across the island and plugged into the main grid, but these generators do not produce steady current, putting extreme stress on transformers and transmission systems that have also gone 50 years without meaningful maintenance.
“on top of that they have built kind of a backup system that is no longer their backup system uh basically big diesel generators all over the place plugged into the grid uh the problem with that is that they're not nearly as steady in terms of the current production and so it's really hard on the Transformers and the transmission system which has also not seen meaningful maintenance in 50 years”
Cuban fuel imports from Venezuela have collapsed from approximately 300,000 barrels per day to approximately 25 barrels per day over the course of the last few years.
“so we've seen uh support go from something like 300,000 barrels a day to something closer to 25 over the course of the last few years”
Hugo Chavez arrived as a 'savior' in the late 1990s by taking power in Venezuela and sending Cuba sufficient fuel to meet all its energy needs, replacing the Soviet Union as Cuba's external subsidy source.
“but then a savior arrived in the late 1990s in the form of a guy by the name of Hugo Chavez who took over Venezuela and started sending the Cubans sufficient fuel to cover all of their needs”
Hurricane Oscar knocked out power in Cuba, but the power was already out before the hurricane made landfall, meaning the hurricane did not cause the outage but rather struck infrastructure that had already collapsed.
“a hurricane Oscar roared ashore in eastern Cuba and I would say like most hurricanes that do this they knocked out power but that is not the case because in Cuba the power was already out”
Hugo Chavez has destroyed Venezuela's own energy production, and his successor Nicolas Maduro has allowed Venezuela to fall apart, causing Venezuela to lose the ability to send meaningful amounts of fuel to Cuba.
“since uh Chavez um has basically destroyed his country's own energy production and especially under his successor nicholos vuro who's the current president uh Venezuela has been falling apart uh and they have basically lost the ability to send meaningful amounts of fuel to Cuba”
Cuba's electrical grid was designed before the 1950s, has not received meaningful upgrades or maintenance in 50 years, was originally built to run on inefficient and toxic oil-burning power plants, and continues to rely on this outdated technology.
“on top of that when you have a grid that was designed back you know before the 1950s it's not all that hot in the first place uh this isn't a country where they have a lot of solar or wind or natural gas they certainly don't have a nuclear power plant what they do is they burn oil uh and that is you know ugly and inefficient and tox but it's also really hard on your power plants and it's been 50 years since any of these power plants have had meaningful upgrades”
Russia and Venezuela, Cuba's traditional sources of emergency support, are either occupied with other priorities, lack the financial resources, or both, and therefore cannot effectively support Cuba during the current crisis.
“the normal candidates to support them Russia and Venezuela are either occupied with other things don't have the cash or both”
The United States faces a massive worker shortage, and as Chinese manufacturing capacity diminishes, the US will need various partners at different stages of production to support the reshoring of manufacturing.
“on the American side we have a massive worker shortage and as the Chinese fail we're going to need various Partners at different stages of production”
When the Soviet Union collapsed in the 1990s, Soviet support for Cuba ended, triggering severe economic and social collapse in Cuba because the island's agricultural economy (based on sugar) could not sustain a modern society on its own.
“well that ended when the wall fell and the 1990s for the Cubans was a really rough time because you know this is an agricultural economy that produces sugar and it's not that their sugar isn't good it's great uh but it's not enough to have a modern society and so in the '90s when the support from the Soviet Union ended the place really started to fall apart by any way that you could possibly measure it”
Cuba cannot export sugar to its logical market (the United States) due to sanctions, forcing it to seek alternative suppliers at greater continental distances, which means everything costs more while Cuba gets paid less for its exports, compounding the energy crisis.
“the income that they get from the sugar export simply isn't sufficient and they can't send to what would be their logical Market the United States and rather than buying from their logical Market from the United States they have to buy from at least a continental way to get what whatever they need so everything costs more and they get paid less”
The two leading theories explaining Cuba's power outage—that it results from socialist mismanagement or US sanctions—are both inadequate; the sanctions argument fails because Cuba has been under sanctions since 1960 yet many sanctioned countries maintain electricity, and the mismanagement argument is incomplete without understanding Cuba's structural economic dependence.
“the two leading theories as to why that power is out that it's a socialist disaster and they can't maintain their Grid or that they're under us sanctions they can't get the parts both of those are kind of crap uh first of all uh let's deal with the US sanctions issue uh Cuba's been under sanctions since God 1960 uh and there are lots and lots and lots and lots and lots of countries that don't like the United States and that the US doesn't like that uh still have electricity so that doesn't answer your question second the idea that the system is mismanaged is um at best an incomplete uh answer”
Cuba's entire electrical grid is falling apart as a result of fuel shortage, aging infrastructure, deferred maintenance, and damaged transmission systems, and the country may be 'down for the count' with no prospect of sustained power restoration.
“bottom line is that the entire grid is falling apart and back last week on Wednesday the lights went out and they never came back on and now the hurricane is hit and it's entirely possible that they're not going to come out in a sustained manner again uh energizing electrical system that's had this degree of damage without a steady supply of fuel inputs is nearly impossible”
Mexico has become too sophisticated for much of the manufacturing that needs to return to the North American continent, meaning it cannot absorb all the lower-tier manufacturing that is moving out of China.
“Mexico to be perfectly blunt has become too sophisticated for a lot of the manufacturing that needs to move back to the continent”
Cuba could plug into the North American manufacturing system in a way that would benefit the three existing NAFTA Partners (US, Mexico, and Canada) by providing lower-cost labor for manufacturing that Mexico cannot absorb and filling the skill-to-wage gap.
“there's a way for them to plug into the North American manufacturing system in a way that would really benefit the three existing NAFTA Partners”
For the first time since the 1990s and the first time since before Spanish colonization, Cuba is actually on its own without external state sponsor support.
“for the first time since the '90s and the first time for syrius since before the Spanish settled the territory Cuba is actually on its own”
Cuba faces potential horrendous mortality and de-industrialization if it cannot recover from its current crisis, meaning Cuba has urgent need for external support and aid.
“the country is on its back and it might not be able ble to get back up which would lead to horrendous mortality and de-industrialization”
Cuba's workforce skill level may be only one-quarter to one-third as good as that of US workers, and probably less, but Cuban workers earn only 5-10% of what US workers earn.
“Cuba uh I mean their skill set might only be a quarter to a third as good as somebody in the United States probably less but they work for 5 to 10% as much”
The ability of US and Cuban politicians to 'get the politics right' will determine whether the economic opportunity to integrate Cuba into North American manufacturing is realized, despite the existence of economic incentives for both sides.
“the question is whether we can get the politics right and for better for worse the power outages plus hurricane Oscar have provided an opportunity to find out”
China, while willing to create problems for the United States where financially beneficial, is not pathologically opposed to US interests like Russia is, and will not risk US displeasure by supporting Cuba unless there is clear financial gain, which does not exist in this case.
“and the Chinese while they love to uh have some irons in the fire in order to cause problems for the United States where they can they're not like pathological about it like the Russians are and they're certainly not going to risk America's displeasure when there's no financial gain to be had and there is no financial gain to be had here”
Cuba's power crisis and Hurricane Oscar have created the most fluid political environment between the United States and Cuba since the 1990s, opening the possibility that Havana or Washington or both will attempt to negotiate some form of deal across the Strait of Florida.
“so we now have the most fluid political environment between the United States and Cuba that we've had since the 1990s and there is a distinct possibility that Havana or DC or both will reach across the straight of floorida to see if they can cut some sort of a deal”
Attempts to energize regional portions of Cuba's electrical system before Hurricane Oscar hit actually shorted out more of the grid, causing additional damage and worsening the overall situation.
“when they tried to do it on a regional scale uh in the days before the hurricane hit they actually shorted out more of the system”
Cuba was functionally a US colony from the Spanish-American War in 1898 until Castro took power at the end of the 1950s, after which Cuba sided with the Soviet Union, particularly following the Cuban Missile Crisis during the Kennedy years in the early 1960s.
“Cuba was functionally a US colony from the time of the Spanish American war in 1898 until Castro threw off uh Us control at the end of the 50s and sided with the Soviets um especially since the Cuban Missile Crisis during the Kennedy years in the early 60s”
Natural disasters tend to bring out both the best and worst in people and states, creating moments where relationships can improve or deteriorate depending on choices made by decision-makers.
“natural disasters tend to bring out the best and the worst in people and the same goes for States”
US and Cuban politicians face a choice during this crisis: either show their 'better sides' and reach across political divides through cooperation and humanitarian response, or 'drive a really hard bargain' and extract maximum advantage from Cuba's desperation.
“there is a chance for politicians on both sides to either show their better sides and turn the other cheek or to drive a really hard bargain”