U.S. Bars Cruises to Cuba in Retaliation for Venezuelan Role

(Bloomberg) -- The U.S. State Department is barring cruise ships from going to Cuba as part of a crackdown on travel to the island, citing government repression and its role in the humanitarian crisis in Venezuela.

“The United States will no longer permit visits to Cuba via passenger and recreational vessels, including cruise ships and yachts, and private and corporate aircraft,” the department said Tuesday.

The action threatens to cut off a burgeoning tourist trade with Cuba that got underway during the Obama administration. Major cruises operators, including market leader Carnival Corp. and No. 2 Royal Caribbean Cruises Ltd., have regular itineraries delivering thousands of American tourists to Havana and other Cuban cities.

The decision caught industry analysts and executives by surprise. Even as the threat of a Trump crackdown loomed, cruise lines had been adding sailings to the island, and Havana was making plans to triple the size of its cruise-ship terminal.

Shares of cruise operators retreated on Tuesday after being up earlier in the day. Norwegian Cruise Line Holdings Ltd. fell as much as 5.1%, while Royal Caribbean declined almost 3%. Carnival also erased earlier gains, leaving it little changed for the day.

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Both Norwegian and Royal Caribbean had ships in Havana harbor on Tuesday, according to data compiled by Bloomberg. The Cruise Line International Association, the industry’s main trade group, didn’t immediately respond when asked for comment.

The U.S. government blames Cuba for propping up Venezuelan strongman Nicolas Maduro and contributing to the humanitarian crisis in that South American country.

The move against cruise travel was announced by the State Department following an earlier release by the Treasury Department restricting “group people-to-people educational travel.” That agency’s statement said the ban on educational travel takes effect on Wednesday.

The Trump administration announced plans for the restrictions in April. Treasury Secretary Steve Mnuchin said on Tuesday that the U.S. is cracking down on Cuba for playing a “destabilizing role in the Western Hemisphere, providing a communist foothold in the region and propping up U.S. adversaries in places like Venezuela and Nicaragua by fomenting instability, undermining the rule of law and suppressing democratic processes.”

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The administration also is ending exports of passenger and recreational boats and private and corporate aircraft. A general license will continue to be required for certain other categories of travel, according to the Treasury Department.

Cruise lines were able to charge higher prices for trips to Cuba than to other destinations, increasing the island’s financial importance, according to Instinet analyst Harry Curtis.

He said the country accounts for about 4% of Norwegian’s capacity, as much as 3% for Royal Caribbean and 1% for Carnival. That could wipe out 15 cents a share from Norwegian’s profit, he estimates. Royal Caribbean would lose 10 cents a share, while Carnival’s earnings stand to decrease by as much as 5 cents a share, he said.

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