Clinton Delays Cuba Trade Penalties

President Clinton on Tuesday delayed harsh new penalties on foreign companies that do business with Cuba, saying that postponing such measures could boost international pressure to force the Fidel Castro regime to a democratic path.

Hoping to defuse a threat to U.S. foreign policy interests and possibly also to his reelection, Clinton announced a choice fashioned to blunt the most drastic consequences of an anti-Castro law that will go into effect Aug. 1.

The law allows Americans to file suit in U.S. courts against any foreign interest doing business using assets seized from U.S. owners during and after the revolution that swept Castro to power in 1959. The measure required Clinton to decide by midnight Tuesday whether to clear the way for the suits, which concern about 6,000 formerly U.S.-owned properties that were nationalized.

Clinton said Tuesday that he had decided to give Americans the legal standing needed to file lawsuits. But he ordered that no suit for damages be brought until at least Feb. 1--after the November election--when he will review whether other governments have done enough to bring about democratic change in Cuba. That part of what is known as the Helms-Burton law, after its authors, Sen. Jesse Helms (R-N.C.) and Rep. Dan Burton (R-Ind.), can be reviewed every six months.

The decision appeared to be aimed at calming foreign governments outraged by the threat of lawsuits while also satisfying anti-Castro Cuban Americans who favor the measure and are important voting blocs in Florida and New Jersey.

Reaction was mixed from Cuban American leaders. Some perceived the move as a stalling tactic that could be followed by backtracking if Clinton wins a second term. “His gelatinous backbone has once again been exposed,” Rep. Lincoln Diaz-Balart (R-Fla.) said.

But Jorge Mas Canosa, chairman of the Cuban American National Foundation and a chief advocate for the law, said he was pleased. “After today, any foreign company that chooses to traffic in stolen property will never be more than six months away from a possible lawsuit,” he said.

European, Canadian and Mexican officials, many of whom privately view the hubbub as largely a product of election-year politics, toned down earlier threats of retaliation.

Clinton said in a statement that foreign companies doing business in Cuba are “hereby on notice that, by trafficking in expropriated property, they face the prospect of lawsuits and significant liability.” He said that foreign governments can either “join our efforts to promote a transition to democracy in Cuba . . . or they can face full implementation of the law.”

Samuel “Sandy” Berger, deputy national security advisor, said that if Clinton had ordered the government to proceed with “no holds barred . . . I believe we would have spent the next six months in intense battles with the allies, in which the Cubans would have stood on the sidelines watching us fight, and the focus of attention would have been off Castro.”

The approach Clinton chose, he contended, was an “effective way” rather than a “sledgehammer way.”

Clinton’s order provides that foreign firms’ liability can begin Nov. 1, even though they cannot be sued until months later.

Officials said they hope foreign governments will cooperate in bringing about a more democratic Cuba in a number of ways.

For example, the governments could put pressure on the Castro regime to improve human rights and expand freedoms, work with the United States to support pro-democratic groups in Cuba, withhold commercial and trading privileges until Cuba moves toward democracy and channel aid to independent groups in the country, rather than through the government.

Clinton will appoint a special envoy to allies to try to win cooperation on the project.

Some analysts predicted that foreign governments will be cool to the notion of helping force changes in Cuba, since many believe that strong trade, rather than a more coercive approach, is the most effective way to convert the hemisphere’s last Communist state.

“I’m not optimistic that the president will get a lot of cooperation,” said Sherman Katz, a trade specialist in Washington.

But some also theorized that if the Clinton administration receives even a modicum of cooperation by next year, it could argue for further postponing the lawsuits.

Helms decried Clinton’s decision. “Mr. Clinton has capitulated to Fidel Castro and his foreign business collaborators,” he said.

Canadian Trade Minister Art Eggleton said the president’s decision “proves the pressure brought by Canada, the European Union and others has been taken note of” but added that Clinton did not go far enough to satisfy America’s largest trading partner.

“While it’s welcome news in terms of the deferral [of lawsuits], they’re still holding a gun to our heads, their allies’ heads, in saying ‘It’s our way or the highway. . . .’ That’s unacceptable,” Eggleton said in a telephone interview from Auckland, New Zealand, where he is attending a meeting of the Assn. of Southeast Asian Nations.

Eggleton said the Canadian government will go forward with legislation this fall to allow Canadian companies found liable in U.S. courts to counter-sue in Canada to recover any damages awarded.

In Brussels, European Union officials welcomed the postponement but said they will continue to consider how to defend their interests against what they view as illegal claims. On Monday, the EU’s 15 foreign ministers listed possible retaliatory measures against the U.S.

However, EU officials stressed in interviews Tuesday that none of the steps agreed to in Brussels are likely go into effect immediately. “Before we do anything, we’ll want to wait to see how they [the United States and American companies] use the law in practice,” said Norbert Schwaiger, a senior EU spokesman.

Official reaction in Mexico, which has filed a diplomatic protest against the law, was moderate. “The Mexican government laments the decision of President Clinton to put the law in place but recognizes that deferring litigation constitutes an effort to recognize the concerns of the international community,” said a statement issued by Foreign Secretary Jose Angel Gurria Trevino.

Times staff writers Craig Turner in Charlottetown, Canada, Tyler Marshall in Brussels and Mark Fineman in Mexico City contributed to this report, as did special correspondent Mike Clary in Miami.

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A Look at the Law

Background on the Helms-Burton law:

* What it does: Helms-Burton, among other things, punishes multinational firms using property confiscated from U.S. citizens following Cuba’s revolution.

* How it works: U.S. citizens would have the right to sue the foreign firms in U.S. courts.

* What Clinton did Tuesday: Put a six-month hold on part of the law, in hopes of avoiding a blowup with allies. (He can do this every six months indefinitely.)

The Cuban Economy

Key investors

Mexico

Canada

Spain

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Key sectors

Mining

Tourism

Oil exploration

Sources: Times staff and wire reports