Cuba's Reforms Are Blocked by the Very Sanctions They Invite

Cuba has just passed the most sweeping economic reform since 1959. A month later, the nearest thing to an investment thesis on the island is a Canadian mining company on its knees.

On June 19th 2026, Cuba's National Assembly approved 176 structural economic reforms to liberalise the economy. They allow private companies to import and export without state intermediation. Foreign investors may hire workers directly. Private banks may open. Fast-food chains may set up shops. The government has been frank about why: it cannot feed, light, or pay its people.

The reforms were prompted by a country running out of diesel, generating less than one-third of its electricity demand, and suffering blackouts lasting up to 22 hours a day. Food production had fallen by 60 per cent, the UN reported in June. Medicine availability had dropped to 30 per cent of normal levels. The tourism industry, long the economy's main earner, has shrunk by roughly half since international airlines and hotel chains pulled out.

To be sure, a reform package of this scope would have been noteworthy even in calmer circumstances. Cuba is dismantling the state monopoly on foreign trade, transforming state-owned enterprises into commercial ventures with equity stakes, and opening real estate, agriculture, energy, healthcare, and education to private capital. The government modelled the approach on China and Vietnam: socialist in name, market-functioning in practice.

The trouble is that the reforms are structurally blocked from working.

Since January 2026, the United States has imposed what amounts to a fuel blockade on Cuba. Under Executive Order 14380, signed on January 29th, which authorized tariffs on countries supplying oil to Cuba, the result was swift. Mexico halted shipments. Venezuela had already stopped exporting to Cuba after its own government was overthrown in late 2025. A Russian tanker carrying 100,000 tonnes of crude oil arrived in March, enough for roughly 12 days of energy demand; a second tanker turned back off the coast of Brazil in May. By mid-May, Cuba's own energy ministry announced it had run out of oil and diesel.

The blockade alone would be enough to paralyse a reform programme. Then came the sanctions.

On May 1st, before the reforms were formally passed, President Trump signed Executive Order 14404, which created a new Cuba sanctions authority under the International Emergency Economic Powers Act and authorized secondary sanctions on foreign persons operating in Cuba's energy, mining, financial services, and security sectors. Under the previous framework, US sanctions mainly bound American companies and nationals. Under EO 14404, any foreign company doing business in those sectors faces the risk of being cut off from the US financial system. The designated list immediately included GAESA, the military-run conglomerate that controls most of Cuba's profitable assets, including tourism, retail, and remittances.

A secondary sanctions regime is, in effect, a toll on any foreign company that trades with Cuba. The "significant transaction" trigger was deliberately left undefined. That ambiguity is not an oversight. It is how you make a sanctions regime do its work: by leaving every foreign bank and every potential partner uncertain whether a given deal is the one that gets them penalised. Foreign financial institutions de-risk preemptively. Deals that might have gone through under old rules simply do not get attempted under the new ones.

The upshot is a structure that no investor can navigate. Cuba opens its energy sector to foreign investment while the US sanctions foreign energy investors. Cuba invites private banks while the US threatens secondary sanctions on foreign financial institutions dealing with Cuba. Cuba wants foreign mining partners while the US specifically lists mining as a sanctioned sector. The reform package and the sanctions regime are not merely misaligned. They are adversarial.

The clearest illustration of this trap is Sherritt International, the biggest foreign investor in Cuba. Sherritt holds a 50 per cent interest in a nickel-cobalt joint venture at Moa, in eastern Cuba, alongside the state miner General Nickel Company. Cuba holds the largest cobalt reserves in the Western Hemisphere and the fifth-largest nickel reserves in the world. The Moa mine has an estimated life of 25 years. Sherritt also holds roughly a one-third interest in Energas, Cuba's largest independent power producer. And it operates the only cobalt refinery in North America, at Fort Saskatchewan, Alberta.

This was not a speculative bet on a pariah state. It was an integrated supply chain: ore mined in Cuba, refined in Canada, sold into the EV battery market. The Moa mine was the feedstock; the Alberta refinery was the processor; the joint venture was a key source of Cuba's foreign exchange.

Then the fuel stopped arriving. In February 2026, Sherritt announced that scheduled fuel deliveries to Moa would no longer be fulfilled. Mining operations were paused. The processing plant was placed on standby. Fort Saskatchewan's feed inventory was expected to last until mid-April.

Then the sanctions expanded. Sherritt was operating precisely in the sectors EO 14404 targeted: mining and energy in Cuba, with ties to the Cuban government through its joint venture. The company issued a going-concern warning on June 26th, stating its ability to meet or refinance its C$79.5m credit facility was uncertain. The CFO and auditor resigned. Three board members stepped down. Shares, which had already fallen from nearly C$5 billion in the late 2000s, dropped to a market capitalisation of C$134 million. Sherritt halted plans to dissolve its Cuban joint venture, then reversed the halt, then entered exclusive talks to sell a controlling 55 per cent stake to a US fund. The shares have been suspended from trading.

Sherritt's fate is not an outlier. It is the mechanism working as designed. The US sanctions campaign has, in Secretary Rubio's words, been to "close off" every new mechanism Cuba creates. Cuba responds with more reform. The US responds with more pressure. The cycle is self-sustaining, and foreign companies caught in it lose both their operations and their balance sheets.

An investor might ask whether Cuba's reforms have any independent value — whether there is a day after the sanctions, or a sector the sanctions miss, or a window of time in which the reforms can do something useful before the crisis worsens.

On the first question: Cuba's president has acknowledged that the reforms will not be viable unless the US lifts its embargo. Analysts at the University of Salamanca and the Quincy Institute have reached the same conclusion: most measures are inapplicable unless US prohibitions are gradually withdrawn. The US position has hardened, not softened, in response to the reforms. The Trump administration initially dismissed them as "window dressing."

On the second question: the sectors the reforms open most aggressively — energy, mining, finance, tourism — are precisely the sectors EO 14404 targets. The few sectors left untouched by US sanctions are largely irrelevant to the reform agenda or already saturated with domestic private activity. The reforms' boldest provisions, from private banks to direct import-export rights, require functioning payment systems, functioning shipping, and functioning fuel. Cuba has none of these.

On the third question: the urgency is real. Cuba cannot wait out this crisis. Its power grid collapsed in March. Millions remain without electricity. Its economy has contracted for five consecutive years. Yet the constraint is not time — it is the sanctions. The longer the blockade persists, the less capital and infrastructure remain for any eventual opening to build upon.

The institutional implication is worth stating plainly. Cuba's Communist Party, confronted with a crisis it recognises as existential, has chosen a reform path that mirrors the strategies of the world's two most successful authoritarian-capitalist states. It has done so not as a voluntary evolution but as a forced triage. That it chose the right medicine is irrelevant if the patient is not allowed to take it.

For investors, the lesson is structural. A reform package is only as actionable as the sanctions regime that surrounds it. Cuba's 176 measures are, in isolation, a coherent programme. Read against EO 14380 and EO 14404, they are a map of a country that cannot travel. No amount of legislative ambition in Havana compensates for a sanctions architecture in Washington that penalises the very participation Havana is trying to invite.

The market has already priced this in for anyone who was watching. Sherritt's market value went from billions to near zero in under a year. No US-listed company with meaningful Cuba exposure has survived the sanctions expansion. The remaining public names with Cuba ties — small-cap miners and property firms on the Toronto, London, and Sydney exchanges — trade at deep discounts to their stated asset values. A large discount to NAV is not a buying opportunity when the underlying assets cannot be operated or sold. It is a market's way of pricing the probability that they become worthless.

The reforms will stand on paper until someone can afford to implement them. Cuban analysts at the University of Salamanca and the Quincy Institute concluded that most measures are inapplicable unless US prohibitions are gradually withdrawn. Until then, they are a signal of desperation, not an invitation.