Analysis: U.S. sanctions make Cuba's bank account too toxic for banks
By David Adams
MIAMI (Reuters) - The decision by a New York bank to close Cuba's checking account in the United States has presented an unusual diplomatic quandary that provides a test for new-found pragmatism in relations between the two longtime foes.
Cuba announced on Tuesday that it is ceasing almost all consular services in the United States after M&T Bank (MTB.N: Quote) closed its account, sending shock waves through the booming Cuba-U.S. travel industry and threatening to undermine the Obama administration's goal of closer "people-to-people" ties.
Cuba blamed its unusual bank-less status on the longstanding U.S. economic embargo against the communist island, as well as sanctions resulting from it being included on the U.S. list of state sponsors of terrorism. These incur regulations - and potential fines - so onerous that banks are reluctant to accept such toxic accounts, experts say.
Cuba has so far not threatened any reciprocal action against the U.S. diplomatic mission in Havana, and observers were watching for signs of restraint, which diplomats would take as further indication that Cuba is pursuing improved relations.
The banking snafu was a problem not likely to go unresolved for too long because both Cuba and the United States have too much to lose from disrupting travel between the two countries, experts said.
But it exposed a conflict within U.S. policy towards Cuba which on the one hand wants closer travel ties with the island, and yet on the other brands it a supporter of terrorism.
"It begs the question how do we modernize these rules so they don't conflict with our policy goals. We want more people-to-people travel, and more family travel," said U.S. Representative Joe Garcia, a Cuban-American Democrat from Miami.
He was referring to the Obama administration's support for educational and cultural exchanges, as well as unrestricted visits for Cuban families divided by the Florida Straits. Continued...