Cuba to cut phone links to U.S.

HAVANA, Cuba (Reuters) -- Cuba said Friday it will cut phone ties with the United States from next week in retaliation for American companies' failure to pay a new tax charged by Havana in response to U.S. use of frozen Cuban funds.

A statement from Cuba's Council of State, the communist-run island's highest governing body, read on state TV and radio, said communications would be suspended December 15.

In October, Cuba slapped a 10 percent tax on the cost of telephone calls between the two countries in response to a U.S. Senate bill allowing the United States to use frozen Cuban funds to compensate victims of "terrorism" by Havana.

Cuba warned at the time that all phone links could be cut if Washington resisted the tax.

MESSAGE BOARD U.S./Cuba relations

Under the October decree, Cuba's national phone company, Empresa de Telecomunicaciones S.A. (ETECSA), a Cuban-Italian joint venture, was to retain the additional funds generated by the 10 percent tax, which were to be charged on every minute of all phone calls between the two countries.

Phone services between the United States and Cuba are provided by ETECSA and half a dozen U.S. phone companies that share the proceeds.

It was the second time in two years Cuba and the United States, which do not have formal diplomatic ties, have clashed over phone links mostly used by Cuban families divided across the Florida Strait.

In an earlier dispute over frozen phone payments in early 1999, Cuba cut five of the seven phone circuits between the two countries but restored them in April 2000.

The latest dispute dates from a Senate bill passed in October which would make Cuban funds frozen in the United States available to pay compensation to the families of Cuban-American pilots killed when their planes were shot down by a Cuban MiG fighter in 1996. Cuba condemned that as "robbery".

The U.S. legislation had targeted frozen funds due to Cuba's phone company for communications services between the two countries between 1966 and 1994. These are estimated by Havana to total more than $120 million.

Cuba had said the 10 percent phone tax would remain in place "until the complete return, with corresponding interest, of the Cuban funds illegally frozen in the United States."

Cuba blames the U.S. government for the 1996 shoot-down of the two small planes, whose four crew members were killed by missiles fired by the Cuban fighter plane.

The four dead men belonged to a Cuban exile group, Brothers to the Rescue, that searched for Cuban rafters leaving the island.

Havana said the four had engaged in "provocative" flights. It accused U.S. authorities of tolerating this.

The October decree said the proposed use of the frozen Cuban funds to compensate the dead pilots' families would prompt similar violations and "acts of air and sea piracy by terrorist groups which feel they have the backing to act with impunity."

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