By Matt Spetalnick and Marc Frank
WASHINGTON/HAVANA (Reuters) - The Trump administration expanded on Wednesday its list of Cuban entities that Americans are banned from doing business with to include the financial corporation that handles U.S. remittances to the Communist-run country.
Military-owned Fincimex is the main Cuban partner of foreign credit card companies and money transfer firm Western Union, which Cubans in the United States have used for two decades to send money back to their loved ones on the Caribbean island.
Those remittances are all the more needed now as the coronavirus pandemic is worsening Cuba's already grim economic outlook, grinding the key tourism industry to a halt.
A U.S. State Department spokesman said the move was designed to stop the flow of remittances through military-controlled financial institutions and the flow of hard currency to the government.
The Trump administration was challenging Cuba to identify another company not affiliated to its military that U.S. financial companies could work with, or to create one, said John Kavulich, president of the U.S.-Cuba Trade and Economic Council.
"If Cuba refuses, the Trump administration is prepared to cease remittances," he said.
He noted a senior official had quipped to him that the sanction was "a birthday present to Raul Castro," the leader of the Cuban Communist Party, who turned 89 on Tuesday.
New regulations implementing the sanction will be closely watched. There is the possibility existing U.S. business with Fincimex could be grandfathered in.
A Western Union spokeswoman said the company was looking into the measure but could not immediately comment.
"The U.S. government continues to act as a rogue state," the general director for U.S. affairs of Cuba's Foreign Ministry, Carlos Fernandez de Cossio, said on Twitter.
The administration of U.S. President Donald Trump says it is tightening the decades-old trade embargo on Cuba, unraveling the 2014-16 detente of his predecessor Barack Obama, to pressure the government to carry out democratic reform.
In private, officials say they see this tough approach to Cuba as a means of currying favor with the large Cuban-American community in south Florida, a state considered vital to Trump's re-election chances in November.
But this action could backfire, say analysts, as it will so openly hurt the relatives of Cuban-Americans, ordinary Cubans, more than the Communist government.
"It is lamentable and counterproductive for U.S. sanctions to also include remittances," said Pavel Vidal, a former Cuban central bank economist who teaches at Colombia's Universidad Javeriana Cali.
Cubans could in normal times at least rely on money brought into the country in person but the government suspended air travel in March in a bid to curb the spread of the coronavirus.
(Reporting by Matt Spetalnick in Washington, Marc Frank and Sarah Marsh in Havana; Editing by Leslie Adler)