Cuba’s Economic Crisis and Strategic Relevance: A Peripheral State in Renewed Great Power Competition

Cuba presents a crucial contrast in geopolitical and economic affairs. It is a small island nation facing severe internal economic difficulties, yet it remains extremely important in global politics due to its geography and strategic alliances. Today, Cuba faces widespread fuel shortages, failing public utilities, foreign currency deficits, and high levels of outward migration (1). Despite these severe internal struggles, Cuba still remains a solid geographic focal point in the growing global rivalry between the United States, China, and Russia (2). Understanding modern Cuba requires looking at how its internal economic hardship travels with contemporary international power struggles in the Western Hemisphere.

The primary cause of Cuba's current domestic crisis is the breakdown of its state-run economic model and physical public infrastructure (3). Decades of strict government control, combined with reduced fuel assistance from regional allies like Venezuela and ongoing American trade restrictions, have severely damaged crucial economic lines such as the national electrical grid run by Unión Eléctrica (4).

​A concrete incident that clearly reveals this infrastructure collapse occurred in October 2024, when Cuba suffered a complete national electrical grid failure (5). The crisis began when the island's primary oil-fired thermoelectric generation facility, the Antonio Guiteras power plant in Matanzas, suffered a sudden mechanical breakdown due to decades of deferred maintenance and a critical lack of spare parts (6). Because Cuba lacked adequate fuel imports and spinning reserve capacity to balance the sudden loss of power, the failure of this single plant triggered a cascading shutdown across the entire national transmission grid, leaving over ten million people in total darkness for several consecutive days even as of 2026 (7).

This blackout event offers a real-world case study in how long-term economic isolation degrades dual-use public utilities. With power plants routinely offline, rolling blackouts lasting up to 18 hours a day are common across many provinces (8). These continuous electrical blackouts disrupt local farming, industrial production, municipal water delivery, and public hospital care (9). The severe economic strain has also led to historic waves of outward migration, as detailed in global border statistics maintained by U.S. Customs and Border Protection (10).

To deal with growing economic pressure and prevent widespread public unrest, the Cuban government has introduced minor economic reforms while keeping political control firmly in the state hands. The government legalized small and medium-sized private businesses, known locally as Mi-pymes, allowing independent entrepreneurs to import, select commercial goods, sell consumer products, and operate small services. Authorities are also seeking foreign capital investment in renewable energy projects like solar farms to help stabilize the electrical grid. However, strict state regulations, price controls, and bureaucratic hurdles continue to limit how fast these small private businesses can expand (11).

​External economic factors also make national recovery difficult for Cuba. Foreign corporate investors and international commercial banks are extremely hesitant to deal with the country due to long-standing American sanctions codified in the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 (12), alongside Cuba's ongoing inclusion in the U.S. State Sponsor of Terrorism list. These legal designations make global financial institutions reluctant to process payments involving Cuban business entities out of fear of facing heavy regulatory fines. As a result, Cuban enterprises struggle to secure foreign commercial credit lines, purchase modern agricultural machinery, or receive international financial transfers needed to maintain everyday economic operations (13).

Despite its severe internal economic struggles, Cuba's geographic position makes it highly strategic on the contemporary world stage. Situated near the Florida Straits, the Gulf of Mexico, and key Atlantic shipping lanes, the island sits right along vital commercial maritime routes and military transport corridors. This geographic location allows Cuba to remain an important geopolitical partner for major non-Western powers seeking to expand their operational presence in the Western Hemisphere (14).

Major non-Western countries use their diplomatic relationships with Havana to project strategic influence close to the American mainland (15). China has built strong economic and technological ties with Cuba, supplying commercial telecommunications hardware while maintaining access to dual-use port facilities and electronic intelligence collection nodes. These signals intelligence sites allow foreign collection services to monitor maritime transport traffic and military communication channels along the American East Coast.

At the same time, Russia maintains close diplomatic and defense ties with Cuba as a low-cost way to counterbalance American military influence across Western international networks. Russian naval vessels, intelligence ships, and commercial crude oil tankers regularly make port calls in Havana, signaling Moscow's operational capacity near American territorial waters. For Havana, hosting these military visits helps secure vital fuel shipments, trade agreements, and foreign credit lines, demonstrating how the Cuban government uses its physical location to build strategic partnerships with Washington's primary global rivals (16). Ongoing economic struggles and failing public utilities continue to drive population movement, impacting regional border management and humanitarian services across North and Central America. Meanwhile, persistent foreign currency shortages make Cuba increasingly reliant on financial support, energy shipments, and capital investments from Beijing and Moscow, strengthening non-Western influence close to the United States (17).

This dynamic leaves American policymakers with a difficult foreign policy choice. Maintaining strict economic sanctions adds to local humanitarian hardship and infrastructure breakdown, pushing Havana closer to foreign strategic rivals. On the other hand, lifting economic sanctions without clear diplomatic agreements risks providing direct financial relief to an anti-hegemonic government. In the end, Cuba remains a classic example of a peripheral state in world politics that is, fragile and economically constrained at home, yet structurally important due to its geography. As competition among major global powers continues to shape international security, Cuba's internal stability, influence with Global South countries and interlinked foreign partnerships will remain central to defense calculations across the Caribbean Basin.

References:

1.     ​Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996, Pub. L. 104-114, 110 Stat. 785, 22 U.S.C. §§ 6021–6091 (1996). https://www.congress.gov/bill/104th-congress/house-bill/927

2.     ​Electric Choice. (2026). Cuba electricity: 2026 crisis, grid overview & history. https://www.electricchoice.com/blog/cuba-electricity-crisis/

3.     ​Human Rights Watch. (2024). World report 2024: Events of 2023 - Cuba. https://www.hrw.org/world-report/2024/country-chapters/cuba

4.     ​Reuters. (2025). Cuba reconnects electrical grid, restores power to much of Havana https://www.reuters.com/world/americas/cuba-begins-restoring-power-capital-havana-outlying-provinces-2025-03-16/

5.     ​The OWP Report. (2024, November 30). Cuba's national grid collapse: More than just an energy issue. Organization for World Peace. https://theowp.org/reports/cubas-national-grid-collapse-more-than-just-an-energy-issue/

6.     ​University of Alabama at Birmingham Institute for Human Rights. (2025, October 10). Cuba's electricity crisis: What's happening and what comes next. https://sites.uab.edu/humanrights/2025/10/10/cubas-electricity-crisis-whats-happening-and-what-comes-next/

7.     ​U.S. Customs and Border Protection. (2024). Nationwide encounters: Cuban migration trends. https://www.cbp.gov/newsroom/national-media-release/cbp-releases-march-2024-monthly-update

8.     ​U.S. Department of War. (2025). Annual report to Congress: Military and security developments involving the People's Republic of China 2025. U.S. Department of Defense.  https://media.defense.gov/2025/Dec/23/2003849070/-1/-1/1/ANNUAL-REPORT-TO-CONGRESS-MILITARY-AND-SECURITY-DEVELOPMENTS-INVOLVING-THE-PEOPLES-REPUBLIC-OF-CHINA-2025.PDF

(The views expressed are those of the author and do not represent the views of CESCUBE)

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