President Obama's much anticipated decision on April 14, 2015, to remove Cuba from the list of state sponsors of terrorism will be good for U.S. businesses. Cuba's removal from the list will accelerate the process of reestablishing full diplomatic relations between the two nations. More importantly, it will increase Cuba's access to international financing, which should lead to increased business opportunities.
Countries listed by the U.S. State Department as being state sponsors of terrorism are subject to the following sanctions:
- A ban on arms-related exports and sales;
- Controls over exports of dual-use items, requiring 30-day Congressional notification for goods or services that could significantly enhance the terrorist-list country's military capability or ability to support terrorism;
- Prohibitions on economic assistance;
- Imposition of miscellaneous financial and other restrictions, including requiring the United States to oppose loans by the World Bank and other international financial institutions;
- Lifting diplomatic immunity to allow families of terrorist victims to file civil lawsuits in U.S. courts;
- Denying companies and individuals tax credits for income earned in terrorist listed countries;
- Denial of duty-free treatment of goods exported to the United States;
- Authority to prohibit any U.S. citizen from engaging in a financial transaction with a terrorist-list government without a Treasury Department license; and
- Prohibition of Defense Department contracts above $100,000 with companies controlled by terrorist-list state.
The President's decision to remove Cuba from the list is subject to a 45-day waiting period allowing Congress to opine on the removal but not necessarily thwart the President's decision. For Cuba, removal from the list should enhance its chances of obtaining more and lower cost financing from international institutions such as the International Monetary Fund and the World Bank. Moreover, international banks will be much more inclined to do business with Cuba. For Cuba and international investors seeking to do business in Cuba, financing should be much less of a problem if the investments otherwise make sense. U.S. banks may also be more inclined to do business with Cuba and Cuba-related transactions.
Overall, with this very important step by President Obama and with increasing interest from international investors in Cuba, we are likely to see more pressure from U.S. business interest on Congress to completely eliminate the remaining aspects of the U.S. embargo on Cuba.