The US is changing Cuba sanctions architecture | United States | Global law firm
On June 11, 2026, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) added Unión Cuba Petróleo (CUPET), Cuba’s state-owned oil and gas company, to the Specially Designated Nationals and Blocked Persons List (SDN List) under Executive Order 14404. The US Department of State explained that CUPET was designated pursuant to Section 2(a)(i)(A) of E.O. 14404 for “operating or having operated in the energy sector of the Cuban economy.”
At one level, the CUPET designation may appear incremental. After all, Cuba has been subject to a comprehensive US embargo for decades under the Cuban Assets Control Regulations (CACR), and US persons were already heavily restricted from engaging in Cuba-related trade and financial transactions. But the CUPET action is significant because it marks the use of a new, parallel Cuba sanctions program—one built on IEEPA-based blocking sanctions and carrying a distinctly more aggressive posture toward non-US actors, foreign financial institutions and energy sector-based targets than the traditional CACR framework.
The legal framework: From the CACR to E.O. 14404 of May 1, 2026
The CACR remain the backbone of US sanctions on Cuba. Administered under the Trading with the Enemy Act, the CACR impose a broad embargo on Cuba and Cuban nationals, with a patchwork of general licenses and exemptions for specified activities. In May 2024, OFAC amended the CACR to increase support for the Cuban people and independent private-sector entrepreneurs, including through expanded financial and internet-related authorizations. Those amendments reflected a calibrated policy of permitting selected activity that supports private Cuban economic actors rather than the Cuban state.
The long-standing framework changed materially on May 1, 2026, with the issuance of Executive Order 14404, creating a new Cuba-related sanctions program under the International Emergency Economic Powers Act (IEEPA), separate from and in addition to the CACR. OFAC’s own FAQ 1251 states expressly that E.O. 14404 is a distinct sanctions program and that it “broadens US sanctions on Cuba” by authorizing sanctions not only on Cuban actors, but also on non-Cuban foreign persons and foreign financial institutions that provide support to blocked persons or conduct significant transactions involving them.
The architecture of E.O. 14404 is important. Section 2(a)(i) authorizes blocking sanctions on foreign persons determined, among other things, to operate in specified sectors of the Cuban economy—including the energy, defense and related materiel, metals and mining, financial services and security sectors—or to act for, support, own, control or be owned or controlled by blocked persons or the Government of Cuba. In practical terms, this means the US government has moved from a traditional embargo model to a more modern sanctions model that resembles programs targeting Iran, Venezuela and Russia, sectoral sanctions and SDN designations under a secondary sanctions framework. OFAC FAQ 1251 notes that E.O. 14404 does not disturb licenses issued under the CACR and points to Cuba-related General License 1, issued on May 7, 2026, which authorizes transactions prohibited by E.O. 14404 where those transactions are otherwise authorized or exempt under the CACR. Accordingly, rather than superseding the CACR, E.O. 14404 layered a new sanctions authority on top of the regulations.
Why CUPET was designated
The State Department’s June 11 press statement is unusually explicit about the government’s rationale for the designation—Secretary Rubio asserted that “energy has long been weaponized by Cuba’s Communist government” as a tool of “repression and self-serving regime kleptocracy,” and alleged that Cuba’s leadership has diverted energy resources for the benefit of the military, intelligence services and elite interests while ordinary Cubans have endured blackouts and fuel shortages. The statement also emphasized that key CUPET assets had been “unlawfully expropriated from American owners years ago.”
Legally, however, CUPET was not designated for past expropriation claims or alleged human rights abuses. It was designated under the comparatively straightforward authority in Section 2(a)(i)(A) of E.O. 14404 because it “operates in the energy sector of the Cuban economy.” Public reporting consistently describes CUPET as controlling or overseeing much of Cuba’s energy value chain, including domestic production, refining, storage and fuel distribution infrastructure. Therefore, the designation of CUPET targets the operational core of Cuba’s fuel system.
OFAC’s evolving use of energy restrictions targeting Cuba
The practical significance of the CUPET designation becomes clearest when viewed against the broader context of the Administration’s evolving use of energy restrictions as a central instrument of pressure on Cuba. Since early 2026, US policy has moved toward what is functionally an energy denial strategy—not through a single comprehensive statutory embargo, but through a combination of measures designed to restrict Cuba’s access to oil and petroleum products from both US and non-US sources.
These measures include the national emergency declared in January 2026 (E.O. 14380), the threat or imposition of tariffs on countries supplying oil to Cuba, targeted designations of shipping networks and state-affiliated actors and—critically—the expansion of sanctions authorities under E.O. 14404 to reach foreign actors supporting Cuba’s energy sector. Together, these actions aim to constrain the Cuban government’s ability to secure fuel imports and monetize energy resources, thereby targeting what the US government views as a core source of regime control and revenue.
Meanwhile, US policy in early 2026 reflected an effort to preserve a narrow humanitarian and economic carveout. On February 25, 2026, OFAC issued FAQ 1238, announcing a “favorable licensing policy” for specific license applications seeking authorization to resell Venezuelan-origin oil for use in Cuba, provided that the transactions support the Cuban people—in other words, the Cuban private sector—and do not involve or benefit Cuban military, intelligence, government institutions, Cuba Restricted List entities or Cuban-owned financial institutions. OFAC also stated that present and future financial transactions had to be structured to avoid those excluded parties, including through non-Cuban banking channels.
Separately, the Bureau of Industry and Security (BIS) issued updated guidance on February 24, 2026 explaining that exports and reexports of US-origin gas and other petroleum products to Cuban private-sector entities or individuals could, under certain conditions, be authorized under License Exception Support for the Cuban People (SCP), 15 C.F.R. § 740.21. BIS’s guidance stated that exporters should instead rely on License Exception SCP where available. BIS was explicit, however, that such exports had to be both for use by the Cuban private sector and for private-sector activities, including improving living conditions and supporting independent economic activity.
These February measures created a narrowly conditioned pathway for fuel-related activity involving non-state Cuban actors. But that policy always rested on a difficult, perhaps unrealistic, assumption: that one could supply fuel to Cuba’s private sector without materially involving the Cuban state. The CUPET designation exposed the limits of that assumption. Private sector customers in Cuba lack independent large-scale logistics and often require access to storage tanks, terminals, trucking and other infrastructure controlled by CUPET or other state actors. Therefore, once CUPET itself became an SDN, that already fragile compliance theory collapsed.
BIS’s subsequent March 4, 2026 determination suspending the availability of License Exception SCP for transactions involving the deposit of foreign funds into Cuban-owned banks further illustrates the government’s concern that even ostensibly private-sector transactions could generate revenue for or support the Cuban state. BIS justified that suspension by pointing to the role of Cuban banks in the regime’s financial infrastructure and the risk that such transactions would primarily benefit the government, contrary to the purpose of SCP. That logic applies with even greater force to CUPET, which sits at the center of the island’s fuel infrastructure.
What the CUPET designation changes
It is tempting to say that the CUPET designation changes little because Cuba and Cuban state entities were already deeply restricted. That view misses the operational significance of putting the energy monopoly itself on the SDN List. Before June 11, many US and non-US participants could at least ask whether a carefully structured transaction supporting Cuba’s private sector might fit within CACR authorizations, BIS license exceptions, or OFAC’s favorable licensing posture. After June 11, any transaction that directly or indirectly touches CUPET is far more difficult to defend because it now involves a specifically blocked person under a sanctions program explicitly designed to deter foreign support.
For non-US persons, the development of a dedicated Cuba sanctions program that expressly contemplates sanctions on foreign actors dealing with blocked Cuban entities will predictably chill financing, shipping, insurance, port services and commodity trading involving Cuba’s fuel system. From a compliance perspective, institutions that may once have approached Cuba as a difficult embargo jurisdiction will now increasingly evaluate CUPET exposure through the same lens they apply to Iranian, Venezuelan or Russian SDNs: near-zero tolerance, heightened due diligence and strong US pressure to disengage.
The designation also has broader doctrinal significance. By targeting CUPET under Section 2(a)(i)(A), the Administration has signaled that sector participation alone can justify blocking sanctions in Cuba sanctions cases. That creates a usable template for future designations involving other strategic state-linked enterprises in energy, transportation, finance, telecommunications, logistics or mining. The pattern already points in that direction: OFAC and State previously used E.O. 14404 to designate GAESA and other actors operating in the financial services, metals and mining and security-related sectors of the Cuban economy. CUPET confirms that the Administration is operationalizing the order sector by sector.
The Administration is trying to maintain the rhetorical distinction between supporting the Cuban people and pressuring the Cuban regime, while simultaneously designating the very infrastructure through which many civilian-support transactions would have to pass. That tension is not unique to Cuba. It is a recurring feature of sanctions regimes targeting state-dominated economies, and it is particularly acute where the state controls ports, banks, refineries, pipelines, telecom networks and food distribution channels. The US concludes that CUPET is a state-controlled chokepoint that itself is a strategic source of regime power and sanctions it on that basis even at the cost of narrowing or negating earlier carveouts.
In light of these developments, companies, banks, insurers, and logistics providers may need to look beyond the stated purpose of a transaction and consider how it is implemented in practice. In particular, attention is likely to focus on whether the transaction, directly or indirectly, involves a designated entity or infrastructure owned or controlled by such an entity. Given CUPET’s role across Cuba’s energy supply chain—including import, storage, and distribution—participants in this sector should be mindful that even transactions intended to support private-sector activity may nonetheless intersect with state-controlled systems, and therefore require careful structuring and compliance analysis.