OIL Diplomacy
Introduction
Nobody knows how much Oil Cuba has but everyone knows that oil is really very precious. It is like an enigma. Estimates are varied from each other. In the latest report in a Latin American Business daily, by Jorge Piñón, a former vice president of Amoco’s Latin American operations quoting United States Geological Survey, Cuba has 5.5 billion barrels of oil and 9.8 trillion cubic feet of natural gas. In November 2008, Rafael Tenreyo, the exploration director of Cuban state oil corporation, Cupet, estimated it as a modest reserve of 20 billion barrels. Nearly a year back, in the statistics of Energy Information Administration, posted in January 2007 on world oil reserves, IEA is quoting World Oil and Oil and Gas Journal, that Cuba has 0.558 billion barrels and 0.124 billion barrels respectively. Both statistics were not crossing even 1 billion barrels. It is difficult to say which one is correct or near to the correct figure. In a news article appeared in MSNBC.com says that it was the Spanish oil company Repsol-YPF, in partnership with Cuba’s state oil company Cupet identified five fields and classified it as “high-quality” in the deep water of the Florida Straits, 20 miles northeast of Havana. Seven months later, a report by the U.S. Geological survey confirmed it: The North Cuba Basin held a substantial quantity of oil - 4.6 billion to 9.3 billion barrels of crude and 9.8 trillion to 21.8 trillion cubic feet of natural gas[i].
Question of Cuba’s oil reserve comes under a different category. Many Latin American countries and Caribbean countries have substantial oil and natural gas reserves. Then what makes Cuba different from others? It is their special relation with United States for nearly 50 years. They are facing economic embargo from U.S. for several decades. In fact, U.S. is still pushing for a ‘regime change’ in Cuba. So far it didn’t happened and Cuba’s leadership is still remaining with Castro brothers. Why it didn’t happen in Cuba and is there a chance to do so? In Iraq, U.S. successfully introduced the regime change within a short span of time and Iraq is far and quiet bigger than Cuba but they had an authoritarian government lead by Saddam Hussein. Cuba is very close to U.S. and they also have an authoritarian government for last 50 years lead by Fidel Castro and it is very small in size. Why the regime change didn’t happen so far and at present there is a possibility to do so? In Cuba, they didn’t find anything special than the revolution of Fidel and Iraq, then it is true, they fought for the control of oil rather than capturing Saddam. Recent finding of oil reserve in the Gulf of Mexico which comes under the sovereign limits of Cuba provides different perspectives to U.S. Cuban relations/hostility.
Summit of the Americas, 2009: The wind of change
In the recent Summit of the Americas in Trinidad and Tobago (17-19 April 2009), U.S. President Barack Obama took effort to change the course of the relationship between United States and other countries in the hemisphere. In fact, he began his speech by recognizing the hurdles of mistrust to be overcome. “I know that promises of partnership have gone unfulfilled in the past, and that trust has to be earned over time,” he said. “While the United States has done much to promote peace and prosperity in the hemisphere, we have times been disengaged, and at times we sought to dictate our terms. But I pledge to you that we seek an equal partnership. There is no senior partner and junior partner in our relations; there is simply engaged based on mutual respect and common interests and shared values.[ii]” In fact, the Trinidad and Tobago Summit ended with more smiles and backslapping. Before the summit, the Obama administration played its Cuba card by announcing the lifting of Bush restrictions on family travel and sending remittances to the island. In return, at the ALBA[1] conference before the summit, Cuban President Raul Castro said, “we have told the North American Government, in private and public, that we are prepared, whatever they want, to discuss everything – human rights, freedom of the press, political prisoners – everything, everything, everything that they want to discuss.[iii]”
The political environment is changed, political actors are also changed, and still the U.S. policy towards Cuba is not changing. During the last 50 years, more than one generation has changed in both Cuba and U.S. The original justification for the embargo was Cuba’s expropriation of “some $1.8 billion worth of U.S.-owned property,” according to the U.S. Foreign Claims Settlement Commission. In turn, Cubans argue that early in the century, the United States had seized control of 70% of Cuban land and three-quarters of Cuba’s primary industry[iv]. Both countries moved forward with different perspectives on economic and political development and reached in different positions in the present world. The original issues of the embargo are now a distant memory of the old people in both countries and the young generation will look into it through different perspectives.
According to the Cuba Policy Foundation (CPF), a nonprofit organization run by a former U.S. ambassador, a majority—52%—wants the embargo to be lifted, with 67% favoring an immediate end to the travel restrictions[v]. The website of World Public Opinion says that majority of US citizens are in favour of changes in the policy towards Cuba. More specifically, the public favours lifting the ban on travel to Cuba for Americans and re-establishing diplomatic relations as well as other changes[vi]. Among the changes, the lifting of trade embargo is the least appreciated in the survey. It says, in 2007, nearly 40 percent of the U.S. people were favour of lifting the embargo and it has moved up to 49 percent in 2009, still it is short of majority. But CPF is more takes it in different way and suggest that tthose percentages might be even higher if the U.S. public were aware that the blockade is actually costing them more than the Cubans, something that is finally beginning to dawn on the U.S. business community.
Throughout the Summit, the focus was on the approach of Obama towards Latin America and also to Cuba. He offered some positive response to the demands of the leaders of Latin American countries. In fact, one month before the Summit, President Obama signed the U.S. Budget and in it, he accepted the some changes in the Cuban policy. In the budget, he made provisions for U.S. residents to travel to Cuba, send money to the family members in the island, and included provision for the sale of agricultural and pharmaceutical products to Cuba. By doing this, he was trying to loosen the restrictions imposed by former President George W. Bush from 2001. Bush tightened some of those restrictions in recent years, most notably limiting travel to the island to once every three years for a limit of 14 days. Under the new provisions, relatives will be able to go once a year and stay for an unlimited time. In addition, the definition of relatives has been broadened to include uncles, aunts, nephews and nieces. The new measures also increase the amount of money visitors can spend. But the U.S. President never touched the key elements in the half a century old embargo. The embargo, which remains firmly in place through the 1992 Cuban Democracy Act and the 1996 Helms-Burton Act, will still block things like the importation of badly needed modern farming equipment and key infrastructural improvements[vii]. President’s offer never touches such matters and only talking about the lifting of travel ban and allowing remittance.
Analysts see the move as a way for the new Obama administration to start thawing relations with Cuba one month before the Fifth Summit of the Americas brings together the U.S. president and 33 other leaders from the Western Hemisphere in Trinidad and Tobago. According to Peter Hakim, president of the Washington based Inter-American Dialogue Policy Institute, “Cuba is the issue of greatest symbolic importance and it will be seen as a test of real U.S. readiness to change in the hemisphere.[viii]” Meanwhile, Otto Reich, who served presidents Reagan and both Bushes in a number of high-level Latin American posts, said he did not like the Cuba provisions in the budget because the United States gets nothing in return. “I’m opposed to it because of the way it was done,” he said. “There’s a way it can be done to advance the conditions of the people in Cuba. I don’t approve of the unilateral way it’s being done. The embargo is a negotiating tool. We should not negotiate with ourselves, and that’s what we’re doing.[ix]” The political influence of personality like Otto Reich matters a lot in U.S. Cuban and U.S. Latin American relations.
Whether the change will take place?
Who will make the changes in U.S. - Cuban relations? The whole Latin America is demanding a much positive approach towards Cuba and in words; we can see Obama is accepting it. Still one can see lot of obstructions in such moves in United States. Mark Weisbrot, the reporter of Guardian observes that the U.S. administration itself will throw the spanner in those damage control processes. In his article, he finds that the bureaucrats in the U.S. administration are not ready to accept the changing environment in U.S.- Latin American relations as well as Cuban relations. While President Obama is making an offensive approach towards the Latin American and Caribbean leaders in the summit to naturalise the relationship, Obama’s Latin American advisor and the director for the Summit of the Americas, Jeffrey Davidow made an adversary comment on one significant Latin American leader. Davidow told reporters: “There is a sizeable population in Venezuela, probably the very, very vast majority of the Venezuelans who have a more favourable attitude to President Obama than they have to Hugo Chavez.[x]” This is the best example to show how the bureaucrats in the U.S. administration can pull back the advancement of its political leaders in certain matters.
So, two things were clear. The public opinion is not good enough to make changes in the relation between two countries. And the approach of political leadership is also not effective to get the things into action. Then, who can make the changes in such situation? In his article, Mr. Jorge Piñón is trying to find the correct answer –the business community. For nearly 50 years, the business community in U.S. is losing its advantage in engaging with Cuban counterparts, just because of the embargo. In fact, the representatives of a dozen leading U.S. business organizations, including the U.S. Chamber of Commerce, signed a letter in December urging Barack Obama to scrap the embargo. The letter pegs the cost to the U.S. economy at $1.2 billion per year. The CPF’s estimates are much higher: up to $4.84 billion annually in lost sales and exports. The Cuban government estimates the loss to Cuba at about $685 million annually. Thus the blockade costs the United States up to $4.155 billion more a year than it costs Cuba[xi]. Along with this lose; the U.S. government also spends US$ 27 million each year to broadcast Radio and TV Marti, even though the television signal is effectively blocked by the Cuban government. According to the Council on Hemispheric Affairs, this largely futile propaganda effort has cost U.S. taxpayers half a billion dollars over the last 20 years.
For U.S. business community, lose of 5 billion annually is not a big issue when they compare it with their investments and returns in other places. But, the moment they realise the gap of lose is going to widen drastically, especially in the light of the recent findings of oil reserves in Cuban offshore, they will start thinking in a different way. Petroleum is one of the key elements which determine the business diplomacy between countries and American oil companies are very powerful in lobbying and opinion creation. Till a couple of years back, they were not bothered about the economy and investment possibility of Cuba. So, finding of oil in Cuba is powerful enough to change the attitude of American companies and will try their best to get maximum stake in the oil reserves in their neighbourhood. The debate is already started in U.S. and the article of Piñón is also part of it.
Presence of Petroleum – Debate of loses and gains
According to Jonathan Benjamin-Alvarado, an expert on Cuban energy matters and a political science professor at the University of Nebraska at Omaha, says America’s thirst for oil will soon force a fundamental change in Washington’s relations with Havana. He always argued that the U.S. should keep the Cuban embargo in place until they got to the point where it started to cost the country something. Today, he adds, “we are almost there”. According to Mr. Phil Peters, vice president of the Lexington Institute, a think tank in Arlington, Va, “if Cuba discovers a lot of oil and becomes an exporter, the embargo almost becomes an absurdity.” Kirby Jones, the founder and president of the U.S. - Cuba Trade Association in Washington, D.C. says that the reality of Cuba as an oil producer makes the embargo to costly a policy to keep. He added, “our choice is: Are we going to let those countries take that oil? Or are we going to look at our strategic interests and recognize that very close to our shores is a substantial quantity of oil that is going to be exploited?[xii]”
These are three opinions of people who carry substantial weight in their areas and all opinions have a common factor that the finding of oil reserve will leads the U.S. to end the embargo. This is the first time the business community in the United States are having a sore taste of embargo and it is difficult for them to leave it away in Cuba’s way. In fact, Cuba did not waste any time and divided the 74,000 square miles area into 59 exploration blocks and welcomed the foreign oil conglomerates with offers of production-sharing agreements. This was the turning point in the enduring economic and trade embargo by U.S. over Cuba for last 47 years. For the first time, the US oil conglomerates felt the heat of the embargo and realised it is very difficult to engage in the exploration activities in Cuba without amending the embargo and Helms-Burton act of 1996. The U.S. oil companies were sure that the Cuba won’t wait for the amendment of U.S. trade and other laws against their country and will precede the operations with the companies from other countries. The U.S. oil companies expected that without their expertise in offshore drilling and technological know-how in exploration, the Cuba will struggle to continue its offshore oil exploration. Within short time, they realised that it was just their illusion and found that the companies from Europe, China, Brazil, India and Canada has started talks with Cuban officials about investments in deep water operations.
This was a huge blow to the U.S. oil companies who strongly believed in the supremacy of their technological advantages, investment competitiveness and diplomatic capabilities in trade and economic dealings. In the case of Cuba, the U.S. oil conglomerates were not in a position to approach the state to intervene and the state was also not in a position to do such intervention in a short time because the laws and policies are against the participation of U.S. companies in Cuban investment was imposed by the state itself. From this time onwards, the oil business lobby of U.S. is trying their best to make amendments in the trade embargo against Cuba. In his article Mr. Piñón accepts that the Cuban authorities have invited United States oil companies to participate in developing their offshore oil and natural gas resources U.S. law does not allow it[xiii]. Then they thoroughly questioned the competitive ability of Cuba’s state owned petroleum companies in offshore deep-water drilling and challenged the economic capability of Cuba to push through the exploration activities without support of American companies.
In the report of Brookings Institution, ‘Cuba: A New Policy of Critical and Constructive Engagement’ Jorge Piñón argues that “our position on Cuba vis-à-vis oil, and that's why you will notice that I'm usually in this panel, again not from the oil point of view, not from the point of view that Cuba has a lot of oil, therefore we the United States needs it, therefore let's go ahead and grab it, let's go ahead and take it, we need the Exxons and the Conocos and the Marathons and the Chevrons to go after it, that is not our position. Our position is very clear, and that is that that future Cuban government in transition or that future Cuban government or people have to be independent of any outside political influence.[xiv]” Why it is just about the future Cuban government? By saying so, it is clearly negating the people who are living in Cuba and their interests and aspirations. In all writings, they projected the expenditure of this offshore exploration and the state of present Cuban economy and purposefully linked it with the problem of existing Cuban communist government and silently demanded the regime change.
Economic superiority, technological advantage, political upper hand, business aggressiveness and diplomatic abilities of the nation as well as the oil companies put U.S. in a blind position in which they cannot see or accept a challenge from any one in any areas mentioned above especially related to the petroleum industry. U.S. severely underestimated the abilities of the state owned petroleum companies in the countries like Brazil, China, and India and companies from the countries like Spain, Canada, and Norway. In May 2005, Spain’s Repsol –YPF announced it was partnering with India’s Oil and Natural Gas Corporation and Norsk Hydro ASA –now a state owned Oil Company of Noway – explore for oil and gas in six of the 59 deep water blocks along Cuba’s maritime border with the United States. Mean while, the Sherritt International Corp., the Canadian oil company has acquired exploration rights of four of the deep sea blocks. These initiatives raised the eyebrows of oil executives like Jorge Piñón and others and started demanding an intervention from the side of the state to provide access for US oil companies to Cuba. Among these companies, the Norsk and ONGC belong to the select companies who have the deep-water know how and technology and when they joined with the Spanish Repsol, the demand raised from American business community saying ‘maybe we better took a look at Cuba again.[xv]’
The American oil executives and the petroleum companies realized that if they fail to remove the embargo and continue to fight against the communist government in Cuba in the name of Human Rights and Democracy, the probability of their participation in Cuba remains nil. Terry Maris, executive director of the Centre for Cuban Business Studies at Ohio Northern University expects that the Cuba will require at least 20 billion US dollar to develop its oil reserve into its commercial potential. He observes that the ‘experience of Sudan and other non-democratic countries shows that foreign companies will invest in Cuba to develop its crude reserves despite human right abuses and a lack of free and fair elections.[xvi]’ Archibald Ritter, professor emeritus of economics and international affairs at Carleton University in Ottawa, Canada, agreed that Cuba’s oil sector will take off in the next few years and believes that it will entail political consequences. He envisages that ‘if the regime lasts until 2015, it will receive a lot of funds from oil. That will strengthen it.[xvii]’
Changing Views US Officials
It is unfair to say that the U.S. political leadership was unaware about these developments and they didn’t do anything regarding this. The lobbying of oil executives and business communities worked very well and in May 2005, the Representative Jeff Flake, R-Ariz., and Senator Larry Craig, R-Idaho, introduced twin bills to the House and the Senate that would exempt Big Oil from the embargo. Before introducing his legislation, Craig told a reporter that “prohibition on trade with Cuba has accomplished just about Zero.[xviii]” These efforts were played down by the highly influential Cuban American voting lobby of Florida. In fact, the moves of Flake and Craig were challenged by people like Alfredo Mesa, executive director of the Cuban American National Foundation in Miami: ‘Those who would advocate for ... allowing U.S. companies to drill off Cuba lose sight of how that would damage our ability to press the Cuban government on other issues, such as human rights.” Thought there is a large demand for change in the U.S. policy towards Cuba, certain powerful lobbies are good enough to turn it around.
The active participation of state owned oil companies from Vietnam and Malaysia along with China, Norway and India in Cuba send worrying messages in United States. It was not because of missing their opportunity in the exploration processes in Cuba, but it was their inability to do in the same in their own fields inside U.S. border, nearby Cuba. During his presidential campaign, Senator McCain tried his level best to lift the federal moratorium on oil exploration in American coastal waters. He realized the missing opportunity in Latin America as well as in domestic field just because of embargo or moratorium will end up in a heavy loss to U.S. economy as well as their huge oil industry. Active participation of companies from China, Norway and Cuba were looked up with high amount of concerns by U.S. think tanks. Mr. Gal Luft, the director of the Institute for the Analysis of Global Security observes that “with more and more countries vying for Western Hemisphere oil, our dependence on Middle East oil is going to grow substantially.[xix]” Here, the inability of U.S. companies is not because of their technological disadvantage or lack of capital investment, it was the legal hurdles made by the U.S. government itself. The eastern portion of America’s section of the Gulf –the part that is closest to Cuba also possesses the same riches as Cuba has. But, any kind of exploration activities were curtailed by the moratorium on drilling, which was imposed by Congress in 1982 and has been extended annually since then President George H.W. Bush issued his own executive order to the same effect in 1990. This moratorium has strong support from state like Florida, whose politicians have expressed concern about what offshore exploration and drilling might mean for its beaches. State’s boundaries generally extended three to nine miles offshore, with the federal government’s jurisdiction extending to 200 miles.
In this juncture, the American oil executives and business community should look into their internal matters first rather than looking at their neighbour Cuba and saying they are exploiting the oil wealth nearby. In June 2008, the issues of oil drilling in Cuban waters become an issue in U.S. when Vice President Dick Cheney felt it is illegal. But later the authorities were forced to accept the fact that the drilling was happening in Cuban offshore territory and China has leased exploration rights in the area[xx]. Another interesting fact is that the Senator McCain who has argued for the removal of moratorium on offshore drilling in U.S. territory has opposed drilling in the Arctic National Wildlife Refuge in Alaska. All these facts show light on the double standard of U.S. authorities on issues regarding oil and Cuba.
Still, the oil lobby of United States cannot relax and forget about the lucrative oil reserve lying in nearby country. The political animosity is a different question when it comes to business and profit sharing. For any country in the world, petroleum industry is considered as the golden goose and U.S. oil industry is also not different from it. Problem here is the inaccessibility to the source. For Cuba, this is a chance to overturn its economic fortunes rather than using oil for fulfilling their political ambitions. For them, it is an issue of survival rather than competing with their big neighbour. Exploration and development of petroleum requires support of advanced scientific technology and huge capital investment and just because of the embargo, they can’t wait for U.S. oil companies to come and do it. In such situations, the political leadership will go for pragmatic solutions and Cuba also did so. They sought for alternative solutions and gathered it from different sources.
U.S. oil experts cannot blame Cuba in this regard. Inability to access in Cuba is not the fault of Cuba and it was a self imposed political decision on U.S. companies for the last 47 years. But in the writings of oil executives in United States are trying to project their technological supremacy and insist that Cuba cannot succeed in the exploration and development of their oil reserves without their participation. In fact, their world is too small and very much U.S. centric. In the time of globalisation, nobody can control the flow of information, knowledge and technology to a certain extend. In his article, Jorge Pinion argues that ‘if U.S. companies were allowed to contribute in developing Cuba’s hydrocarbon reserves, as well as renewable energy such as solar, wind and sugarcane ethanol, it would reduce the influence of autocratic and corrupt governments on the island’s road toward self determination.[xxi]’ If this is the contribution of U.S. companies in energy sector, then the political profile of countries in the Middle East might have changed long back. Saudi Arabia is still not a proper democratic country as well as Kuwait and UAE.
Conclusion
Cuba is a country which has membership in United Nations and has bilateral and multilateral relations with a good number of countries in the world. The eight years of relative U.S. engagement in Afghanistan and Iraq, saw the Latin American countries develop a range of autonomous ties and new habits as well as alliances and inter-American institutions, most of which lack U.S. membership. This is a huge development and could re-direct the entire nature of U.S.-Latin American relations. Consequently, Cuba now has alternative sources of finance and trade; it is no longer entirely reliant on the U.S. Indeed, Washington now stands all but alone in the western hemisphere in not maintaining full diplomatic ties with Havana[xxii]. In fact, they are isolated by one country, the United States of America. Cuba is a sovereign country to keep economic and political relationship with any country in the world and they have the right to engage in any business deals with any country, if it is beneficial to the national interest of the country. The concept of imposition of future government could be interpreted as the demand for the regime change and we all know what happened in the places the regime change occurred in near past. How long US can isolate Cuba from the Summits of the Americas? The recent Summit was focused on one point agenda from the Latin American countries and that was inclusion of Cuba in OAS. It was not the demand from Venezuela, the friendliest country of Cuba and it was a unanimous demand.
Latin America itself has changed a lot in the last two decades. Their political and economic dependency on United States has come down to a significant level. They also changed themselves from their revolutionary past to a pragmatic future. Maybe, the distraction of US from Latin America, because of their engagement in the Middle East, helped them to move in a different direction. In the present Latin America, one can see their thirst for togetherness in the areas of trade and development. In the domains of economic development, the present day Latin America is more keen in diversifying their sources rather than depending on United States and selected countries of Europe. The big countries like Brazil, Argentina, Mexico etc., are pushing themselves to keep better relations with countries like India, China, South Africa and Russia. This is very evident in the case of Petroleum industry. Countries like Brazil, China, India and Russia has developed their own technology in exploration and development of petroleum resources. Companies from China and India are very keen in investing in the oil reserves in Latin American countries and also to do joint ventures with their petroleum companies like Petrobras, PDVSA etc.
Recent exploration result from Tupi oil filed in Brazil has proved that the developing countries are capable to cope up with technological know-how in advanced areas in oil industry. India’s ONGC-Videsh also has its own expertise in deep water exploration and joint venture with companies from Spain or Norway will certainly enhance their abilities to compete with U.S. companies. For countries like China and India, the development of deep water oil fields in Cuba will be beneficial in both ways. Cuba needs technology to develop the reserves and keep their energy security and economic development process in right track and countries like China and India requires uninterrupted flow of petroleum for their industrial development. If Cuba is successful in attracting more companies in the development process of its offshore reserves, the competition will be healthy and will do better for the country.
[1] ALBA: Boliverian Alternatives for the Americas (Spanish - Alternativa Bolivariana para los Pueblos de Nuestra América) - which also means 'dawn' in Spanish) is an international cooperation organization based upon the idea of social, political, and economic integration between the countries of Latin America and Caribbean. Cuba, Venezuela, Nicaragua, Bolivia, Honduras etc., are members of this cooperation.
[i] MSNBC.com, Cuban Oil renews embargo debates, 29 July, 2006
[ii] Laura Carlsen, Words and Deeds in Trinidad, FPIF.
[iii] ibid
[iv] Margot Pepper, ‘The Cost of the Embargo’, 03 March 2009 - www.coha.org
[v] Ibid
[vi] http://www.worldpublicopinion.org/pipa/articles/home_page/600.php?nid=&id=&pnt=600&lb=
[vii] Michale Chasse, The big picture of the Cuban embargo and travel ban, 28 April, https://nacla.org/node/5769
[viii] Arthur Brice, CNN, March 11, 2009
[ix] Ibid
[x] Mark Weisbrot, Guardian, 22 April 2009
[xi] Magot Pepper, ‘The Cost of the Embargo,’03 March 2009 –www.coha.org
[xii] MSNBC.com, Cuban Oil renews embargo debates, 29 July, 2006
[xiii] Jorge Piñón, ‘US Presence in Cuba Oil?’, Latin Business Chronicle, 04 May 2009.
[xiv] The Brookings Institution, ‘Cuba: A New Policy of Critical and Constructive Engagement’, 22 April 2009, Washington D.C.
[xv] MSNBC.com, Cuban Oil renews embargo debates, 29 July, 2006
[xvi] Latin Petroleum Magazine, ‘Experts Predict Jump in Cuba Oil Production, 02 December 2008
[xvii] Ibid
[xviii] MSNBC.com, Cuban Oil renews embargo debates, 29 July, 2006
[xix] Joseph Glodetein, New York Sun, 19 July, 2008
[xx] Ibid
[xxi] Jorge Piñón, ‘US Presence in Cuba Oil?’, Latin Business Chronicle, 04 May 2009.
[xxii] COHA, ‘Cuba and United States: Let’s Not Waste an Opportunity for Change’, 22 April 2009.
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