South Florida company strikes historic deal to send fuel to Cuba's private sector

A Coral Gables company has struck a historic deal to send fuel to Cuba's private sector on oil tankers, marking the first time since the 1960s that the U.S. could send this much oil to the island.

After more than a dozen meetings with Cuban and U.S. officials, Vanguard Energy signed a contract to lease facilities owned by the Cuban government to store fuel, allowing its larger oil tankers to head to Cuba.

A critical component of the agreement focuses on ensuring the fuel stays out of the hands of the Cuban government. Matthew Aho, with Akerman, who helped broker the deal, said Vanguard Energy will maintain ownership and control of the fuel in the storage tanks.

"There is no transfer of title. There's no change in ownership," Aho said. "The fuel continues to be owned and controlled by Vanguard in the tank. So that was the first point."

The second safeguard is that Vanguard will be able to pick the companies to which they sell the oil without any interference from Cuba. Vanguard maintains a strict vetting program and is also avoiding operating through the Cuban banking system.

Aho noted that a key challenge will be preventing the private companies from turning around and selling the fuel to the Cuban government. Orders "far in excess of what they would need for their own needs," such as 10,000, 15,000, or 20,000 gallons, would be a "red flag" for the company to monitor and ensure consistency with the approved customer's needs.

John Kavulich, president of the U.S.-Cuba Trade and Economic Interest Council, which represents the business community, believes Cuba wants the deal to succeed.

"The Cuban government knows that everyone's watching this, so I think they're going to behave themselves, because also it alleviates some pressure on them, and that's something they desperately need right now," Kavulich said.

Vanguard President Matthew Klann called the deal the "blueprint for privatization of the fuel market". He expressed hope that the move will encourage more oil companies to enter Cuba, which could lead to branded and non-branded gas stations being looked at for sale, with banking and transactional services running alongside the retail fuel markets.

While the Cuban government has agreed, Vanguard is still waiting for the U.S. to give the official green light to ensure they are strictly following U.S. rules and regulations. The current deal would replace the prior process of sending small, costly, and inefficient amounts of fuel to the private sector, which began several months ago when U.S. companies were allowed to sell to private companies on the island without a specific license.