Low oil prices are forcing Venezuela to cut a generous subsidy program to Cuba and a dozen other Caribbean nations.
Venezuela is Latin America's largest oil producer, and its economy depends heavily on oil exports. It's been been hit hard by the tumbling oil prices.
"Venezuela is in desperate straits. The oil sector has been deteriorating, and now with the slumping oil prices, they needed cash desperately," says Michael Shifter, the president of the Inter-American Dialogue.
Shifter says it's no surprise that Venezuela is trimming back a program that provides heap oil at favorable rates to many of its Caribbean neighbors that are dependent on energy imports. Petrocaribe was created a decade ago by late Venezuelan president Hugo Chavez. It provided subsidized oil to countries such as Belize, Haiti and Jamaica.
The discounts helped the other nations balance their budgets, and finance schools, social programs, and small businesses and farms.
"This was part of his broader strategy to extend his influence to consolidate support and also to curtail influence of the United States in the region," Shifter says. But he says when prices dropped, Venezuela "couldn't sustain this, it was impossible."
The Miami Herald, citing a report by Barclays investment bank, says the subsidy cuts are down by about half for most countries from what they were in 2012. But the report says those cuts deepened when crude oil prices began to drop in August 2014.
But Caribbean nations have been bracing for the steep cutbacks in shipments of cheap crude oil, according to the Wall Street Journal. The newspaper quotes the governor of Jamaica's central bank saying his government is adjusting by being more cautious about what to expect from Petrocaribe.
Even Cuba — the nation most closely-aligned ideologically to Venezuela — is seeing cuts to its subsidies. The Barclays report says Cuba paid for its oil by sending doctors and teachers to Venezuela.
But IHS Janes Intelligence Review says ties between the two counties remain very strong, and the oil supplies are essential for Cuba, because they are the country's main source of external revenue and foreign exchange.
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