Oil from Russia

Lacking water power, coal or petroleum, Cuba runs on imported oil. For many years, the oil has flowed from Shell, Jersey Standard or Texaco wells in Venezuela, traveled in Shell, Jersey Standard or Texaco tankers to Cuba, been refined at Shell, Jersey Standard or Texaco refineries at Santiago or Havana. It was paid for with dollars earned by selling sugar in the U.S.

Tempted by visions of bartering sugar for oil, and taking the advice of the Communist who is his chief economic brain, Ernesto ("Che") Guevara, Fidel Castro last week turned to Russia for the oil to run Cuba. In doing so, he seized a $20 million Texaco refinery and a $35 million Jersey Standard (Esso) refinery, both U.S.-owned, and a $20 million refinery of Canadian Shell, Ltd.

Command Decision. Some such showdown has been in the making ever since Castro signed an agreement with the visiting Soviet trader, Anastas Mikoyan, last February to sell Russia 5,000,000 tons of sugar and buy 10 million bbl. of Russian oil (half a normal year's needs) in return. Castro's government asked the refineries to process the Russian crude. They consulted and refused. For a time, the Cubans did not press further. But three weeks ago, a Cuban economic mission traveled to Moscow and signed an agreement to buy additional Soviet oil at a price that Castro claimed as $1 less than the $2.80 per bbl. the foreign refineries were paying their Venezuela affiliates. This time the Cubans flatly demanded that the refineries take the Russian crude.

It would not be the first time.* But the oil refiners were convinced that Castro's squeeze would not end here: eventual confiscation seemed certain. Texaco sent its staff families home and prepared for further trouble. For months the Cuban government had refused to allow the oil companies to exchange pesos for hard currency to pay for crude. Remittances were more than $60 million in arrears. Moreover, using Russian oil would disrupt the well-to-pump integration that big oil companies count on for efficiency and profits. The companies decided to stand fast. Last week Castro sent two barges of Russian crude to Texaco's refinery near Santiago with orders to refine or get out. Even before the barges arrived, Texaco's officials had left. The refinery was adjusted to handle the Russian crude, and production started.

Obliging Greeks. To supply the 20 million bbl. of oil that Cuba burns each year, between 15 and 25 tankers will have to travel constantly between the Black Sea and Cuba. A group of "golden Greek" tanker operators, led by the wealthy Stavros Niarchos, has signed an agreement to charter between 80 and 120 tankers to the Soviet Union. Niarchos piously denies that any of the ships will be used to carry oil to Cuba--but, of course, the deal frees Russian tankers to do the job. Even so, Castro could be heading for trouble. On one of his recent TV marathons, he confided that Cuba has only a 66-day supply of gasoline and 34-day ration of fuel oil.

Since the nation's power comes almost entirely from fuel-oil-operated plants, Castro can next be expected to try his hand at running the $300 million U.S.-controlled Cuban Electric Co.

* Two-thirds of the gas that Shell and Esso sell in Finland comes from Russia. But this is based in part on recognizing that Finland keeps political independence by accepting some economic dependence on its big Russian neighbor.

This file is automatically generated by a robot program, so reader's discretion is required.