Russian President Vladimir Putin is currently on a grand tour of Latin America. His first stop is in Havana, Cuba. Ahead of arriving in Cuba, Putin decided to bestow a gift upon the Cuban government. With one swift signature, he eliminated $32 billion of Cuba’s debt, left over from the Soviet era.
Cuba isn’t completely off the hook. They will be required to pay back just $3.2 billion over the next ten years, a 90 percent decrease from what they previously owed. The first payment is due in October, and will be made from the National Bank of Cuba to the Russian lender Vnesheconombank.
Cuba has been working to restructure its debt over the last few years. In 2011, Cuba was able to restructure a $6 billion debt with China. Other nations have also forgiven their debt. In 2012, Japan forgave $1.4 billion and more recently, Mexico forgave $478 million in debt.
While it may be nice to think Putin was simply showing a kind gesture to the Cuban government in forgiving this debt, it may be motivated by oil. Right now, the Cuban state oil company CUPET and Russia’s Rosneft are in negotiations for a very lucrative deal. Russia and Cuba are close allies. Last year, trade between the two countries totaled about $200 million.
