Jamaica Homes Global Conflict & Caribbean Impact Review | Published 3 January 2015 | Reporting Period: 3 October – 2 January 2015
Quarterly Briefing
- Global oil prices fall from roughly $90 to below $60 per barrel during the quarter after OPEC’s November 27 meeting refuses to cut production; the crash transforms the economics of PETROCARIBE and deals a severe blow to Venezuela’s fiscal position.
- Ebola peaks across Guinea, Sierra Leone and Liberia; the death of Thomas Eric Duncan in Dallas on October 8 — the first Ebola fatality on American soil — triggers fear of global spread and briefly rattles travel and tourism markets.
- Presidents Obama and Castro announce on December 17 that the United States and Cuba will restore diplomatic relations after more than five decades of estrangement; the announcement transforms the geopolitical landscape of the Caribbean.
- ISIS beheads British hostages Alan Henning on or around October 3 and Peter Kassig on November 16; the campaign of filmed executions continues to drive US-led coalition airstrikes across Syria and Iraq.
- Pakistani Taliban gunmen attack the Army Public School in Peshawar on December 16, killing 132 schoolchildren; Australian police end a Sydney café hostage siege on December 16 in which two hostages die.
- Hong Kong’s Umbrella Movement, which occupied major city streets from late September, is cleared by authorities in late November and December after failing to extract concessions on democratic reform.
Prologue: A Quarter That Reshaped Caribbean Calculations
In terms of direct Caribbean consequence, the final quarter of 2014 may be the most significant three-month period covered by this series since the 2008 financial crisis. Two events in particular stand out. The first is the collapse of global oil prices: Brent crude fell from roughly $90 per barrel in October to below $60 by year end, a decline that directly struck at the architecture of PETROCARIBE — the Venezuelan-subsidised oil programme that has provided critical fiscal relief to Jamaica, Haiti, Guyana, Belize and a dozen other Caribbean nations for nearly a decade. The second is the announcement on 17 December that the United States and Cuba would restore full diplomatic relations, a shift whose implications for Caribbean investment, trade and regional politics will unfold over years rather than months. Both stories dwarf, in Caribbean terms, the more globally prominent events of the quarter: the Ebola epidemic, ISIS’s continuing campaign of beheadings and the growing toll in Pakistan and Australia from Islamist-inspired violence.
The Oil Price Collapse and the PETROCARIBE Crisis
OPEC’s decision on 27 November not to reduce production sent oil prices into a steep decline that had already been building through the autumn as US shale output continued to surge. By the end of December, Brent crude was trading below $60 per barrel, down from peaks of over $100 in the summer. For Venezuela — which finances PETROCARIBE’s concessional terms through oil export revenues — the crash is potentially catastrophic. Venezuela’s budget was calculated at $60 oil; at actual trading prices it is already in deficit, and President Maduro’s government is now confronting a combination of falling revenues, inflation running at over 60 per cent, currency controls, empty supermarket shelves and a National Assembly election cycle that it cannot easily postpone.
Jamaica receives roughly 50 per cent of its oil through PETROCARIBE arrangements on concessional payment terms that have provided significant balance-of-payments relief since 2005. PETROCARIBE crude has also been securitised in ways that gave Caribbean governments access to capital through Petrocaribe development funds. With Venezuela’s fiscal position deteriorating rapidly, the medium-term future of the programme is now a subject of serious regional concern. Governments across the Caribbean are assessing what oil price levels would force Venezuela to renegotiate or wind down the arrangements, and what alternative financing mechanisms would be required. The irony is not lost on policymakers: lower oil prices are in one sense a windfall for oil-importing economies, but the mechanism through which Caribbean states have accessed oil is precisely structured around a high-price Venezuela, and that structure is now under stress.
Cuba-US Normalisation: A Caribbean Watershed
The announcement of 17 December 2014 was made simultaneously by Barack Obama in Washington and Raúl Castro in Havana, and it came as a genuine surprise to most observers. After eighteen months of secret negotiations mediated in part by Canada and the Vatican, both governments committed to re-establishing embassies, easing certain trade and travel restrictions and releasing prisoners, including the American Alan Gross whose imprisonment had been a persistent irritant in any prior thawing of relations. The full dismantling of the US embargo requires Congressional action, and Congress — now Republican-controlled in both chambers — is not expected to cooperate enthusiastically.
The implications for the Caribbean are substantial and complex. Cuba’s integration into normal hemispheric economic life, if it proceeds, would create both competition and opportunity for neighbouring Caribbean economies. Jamaica’s tourism sector, for instance, must now consider a scenario in which Cuba becomes fully open to American tourists — a market of 320 million that has been closed to the island by law for fifty-four years. Simultaneously, the normalisation may generate new investment flows through the Caribbean as infrastructure and financial services develop around Cuba’s new economic opening. For CARICOM, the announcement resolves a long-standing awkward position in which the bloc maintained ties with Cuba while its largest member states were effectively squeezed by American pressure to align with the embargo.
Ebola and the Limits of Global Health Preparedness
The Ebola epidemic in West Africa continued to intensify through the quarter. Liberia, Sierra Leone and Guinea together recorded thousands of deaths; the WHO and Médecins Sans Frontières both warned that containment was failing. The death on 8 October of Thomas Eric Duncan in Dallas — the first Ebola fatality on American soil, a Liberian national who had flown to the United States while knowingly exposed — triggered a wave of American public anxiety disproportionate to the actual transmission risk in a high-income country with modern hospitals. Two Dallas nurses who treated Duncan subsequently tested positive; both survived. Several American states imposed quarantine requirements on returning health workers. Airlines reported booking cancellations on West African routes. Cuba, notably, sent the largest international medical brigade to the affected region — over 460 healthcare workers — a deployment that drew international praise and was subsequently cited by American officials as demonstrating Cuban goodwill during the normalisation negotiations.
ISIS, Pakistan and Australia
The Islamic State’s campaign of filmed hostage executions continued with the killings of British aid worker Alan Henning, whose execution was confirmed on 3 October, and American aid worker Peter Kassig, killed on 16 November. US-led coalition airstrikes intensified, with the battle for the Kurdish city of Kobani on the Syrian-Turkish border drawing particular international attention after ISIS forces came close to seizing it in October before being pushed back by a combination of US airstrikes and Kurdish YPG fighters. The coalition’s composition — including Gulf states, Jordan and Australia — reflected the broad international alarm at ISIS’s territorial and ideological reach.
That reach was demonstrated again in December by two apparently autonomous attacks in Commonwealth countries. On 15–16 December, a gunman inspired by Islamist ideology, Man Haron Monis, took hostages in the Lindt café in Sydney’s central business district; the sixteen-hour siege ended with two hostages and the gunman dead. The following day, Pakistani Taliban gunmen stormed the Army Public School in Peshawar and systematically shot 132 children and nine staff members — the deadliest terrorist attack in Pakistan’s history.
Looking Ahead
Jamaica and the Caribbean face 2015 with the PETROCARIBE question unresolved. Venezuela’s trajectory under continued low oil prices will define the programme’s future; no one entering 2015 knows whether oil prices will recover, fall further or stabilise. The Cuba-US normalisation process has months of diplomatic and legislative work ahead of it; Jamaica’s government will need to develop a coherent response to the scenario of Cuba’s gradual economic opening. Ebola’s trajectory in West Africa remains unpredictable. And ISIS, despite losing ground at Kobani, retains control of substantial territory in Iraq and Syria and continues to inspire attacks worldwide. The quarter just ending brought extraordinary news from multiple directions simultaneously; the quarter beginning today is unlikely to be quieter.
Jamaica Homes Global Conflict & Caribbean Impact Review is published quarterly, examining how wars, geopolitical tensions and major international crises have shaped Jamaica, the Caribbean and their economies.
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