How the May 1 Executive Order Expands U.S. Sanctions on Cuba

On May 1, the White House issued a new executive order titled, “Imposing Sanctions on Those Responsible for Repression in Cuba and for Threats to United States National Security and Foreign Policy.” The order significantly expands the scope of U.S. sanctions policy toward Cuba, including through the use of secondary sanctions targeting foreign individuals, companies, and financial institutions that engage with the island. To better understand what the order changes, how it could affect Cuba and foreign businesses, and why it matters, CEDA spoke with William LeoGrande, Professor of Government at American University and a leading expert on U.S.-Cuba relations.

1. In plain terms, what does this executive order actually change about U.S. policy toward Cuba?

Most of the existing sanctions against Cuba prohibit “U.S. persons”—individuals or organizations subject to U.S. jurisdiction—from engaging with Cuba for travel, trade, investment, and so forth. Anyone who violates the sanctions risk heavy fines. This new Executive Order introduces a broad range of potentially far more severe penalties against foreign “persons” and foreign banks that engage with Cuba. 

2. This order introduces secondary sanctions. How do those work in practice, and why are they significant for non-U.S. companies and countries?

Under secondary sanctions, a foreign entity that engages with Cuba in a way prohibited by this Executive Order can itself be sanctioned so that no U.S. “person” can engage with that foreign entity and its assets in the United States can be frozen. Canada’s Sherritt International, the largest foreign investor in Cuba, has already been sanctioned in this way for having investments in Cuba’s mining and energy sectors. Going forward, foreign companies may have to choose between doing business in Cuba or in the United States. Even worse, the Executive Order also provides that once a foreign entity has been sanctioned under this Executive Order, other foreign entities that engage with the sanctioned entity are also subject to being sanctioned by the United States. 

3. Why did the administration choose to issue this order now, and how does it fit into its broader strategy toward Cuba and the region?

The Trump administration’s strategy from the outset has been to tighten the economic embargo against Cuba. Initially, the Trump White House reversed the measures President Biden took just before he left office, then it imposed the oil blockade, and now secondary sanctions. Conversations are currently underway between Washington and Havana, and President Trump’s negotiating style is to impose maximum pressure to try to gain an advantage at the bargaining table. 

The administration’s new National Security Strategy document reinstates the Monroe Doctrine (dubbed the “Donroe Doctrine”), calling for the United States to be “preeminent” in the Western Hemisphere, and expel “extra-hemispheric” rivals, especially Russia and China—countries with which Cuba has especially close relations. 

4. What are the most likely real-world impacts, both on Cuba’s economy and on foreign businesses deciding whether to engage with Cuba?

The impact is potentially far-reaching and devastating. The Executive Order is so broad that if fully implemented it would subject almost any foreign entity to U.S. sanctions if they engage with Cuba, even just to provide humanitarian assistance. The threat of being sanctioned in this way and placed on the Specially Designated Nationals and Blocked Persons list ("SDN List"), would be enough to cause most foreign businesses to cut all ties with Cuba. Already, foreign banks and shippers are reluctant to do business with Havana for fear of violating the existing embargo. Many refuse to engage in commercial relations that are perfectly legal, a posture known as “over-compliance.” That will get worse.

The Executive Order is just over a week old, so we do not yet know whether the administration intends to apply it narrowly, sanctioning just a few companies in order to scare others out of Cuba, or whether it intends to sanction a wide range of foreign businesses, NGOs, and individuals. Either way, the prospect of being sanctioned will certainly make most foreign businesses reluctant to engage with Cuba. 

5. Does this order represent a meaningful escalation in U.S. sanctions policy toward Cuba, or is it more of an evolution of existing tools, and what makes it stand out compared to past measures?

It is definitely a major escalation that aims to multi-lateralize the U.S. embargo by forcing foreign companies to join or be punished themselves. Until now, the embargo has focused mainly on preventing U.S. persons from engaging with Cuba. To be sure, the embargo has extraterritorial elements: Title III of the Cuban Liberty and Democratic Solidarity Act threatens foreign investors with being sued in U.S. federal court; Cuba’s inclusion on the State Sponsors of Terrorism list discourages foreign banks from doing business there and discourages Europeans from visiting the island; and the dominance of the U.S. dollar in global trade allows Washington to impose fines on foreign banks that handle Cuban business even when no U.S. person is involved. Nevertheless, most foreign businesses and NGOS that want to engage with Cuba have been able to without the risk of being sanctioned by the United States. That is no longer true.