(Adds details from U.S. official and Cuban American congresswoman, paragraphs 5-8))
By David Adams
MIAMI, Nov 26 (Reuters) - Cuba is shutting down nearly all of its consular services in the United States until further notice after it said no bank would handle its business, the government announced on Tuesday, blaming the situation on the longstanding U.S. economic embargo.
The decision threatens to disrupt a recent surge in travel between the United States and Cuba on the eve of the busy holiday season, as well as the Obama administration’s “people-to-people” policy of increased contact with Cuba.
The Cuban Interests Section, Havana’s diplomatic mission in Washington, said in a news release that it was informed in July by its bank, M&T Bank, that it would no longer provide banking services to foreign missions.
Officials at Buffalo, New York-based M&T Bank did not respond to phone calls seeking comment.
The Obama administration tried to convince M&T to keep the account active, according to a U.S. official.
“The Department of State has been actively working with (the Cuban Interests Section) to identify a new bank to provide services to the Cuban missions,” a spokeswoman for the department said.
The administration does not believe the decision was politically motivated and was brought on by the complicated nature of Cuba’s banking needs and currency convertibility issues that did not make it commercially viable for M&T to keep the accounts open.
M&T has apparently divested all of its diplomatic accounts in recent years and this was the last remaining one.
In Tuesday’s press release, Cuba blamed the five-decade-old U.S. embargo that limits financial transactions with the island, saying it had been unable to find another bank willing to operate its U.S. accounts.
The decision came as a shock to travel companies offering services to Cuba. They said it would affect many travelers, both Cuban and American, who need documents approved by Cuban consular officials prior to departure.
Christmas period flights were sold out between Dec. 20 and Dec. 31 and those passengers would not be affected as they already have travel documents, said Tessie Aral, president of Miami-based ABC Charters, one of several companies offering charter flights to various cities in Cuba.
But other travelers who do not have up-to-date Cuban passports and need a visa to travel “would have a problem,” she said.
IMPACT ON ‘PEOPLE-TO-PEOPLE’ PROGRAMS
Cuba said the loss of banking services meant consular services would only be available for humanitarian and special cases “until further notice.”
Cuba said it “particularly regrets the effects this may have on Cuban and U.S. citizens ... with the negative impact on family visits, academic, cultural, educational, scientific, sports and other kind of exchange between Cuba and the United States.”
Cuban American critics of Cuba’s communist government accused it of seeking to use the banking issue to pressure the Obama administration to relax U.S. sanctions against the island.
“The Obama administration has already weakened many sanctions and it should not fall for this blatant emotional blackmail,” said U.S. Representative Ileana Ros-Lehtinen, a Republican from Miami.
On the other hand, the decision is potentially a big blow to Cuba’s tourism industry, one of the mainstays of the island’s cash-strapped economy.
Around 350,000 Cuban Americans visit relatives in Cuba each year according to travel industry estimates. Many of them must seek entry visas if they do not have a valid Cuban passport.
Cuban emigres who lack U.S. citizenship must keep their Cuban passports up to date through the Cuban Interests Section in Washington.
Close to 100,000 Americans also visited Cuba in 2012, according to the Cuban government, under the Obama administration’s people-to-people policy of cultural and academic exchanges, providing much needed revenues to the hotel and restaurant industries.
Cuba said the United States was required under the diplomatic treaties to ensure “full facilities for the performance of the functions” of its diplomatic missions and consular offices in the United States.
The U.S. does facilitate connections but has no ability to compel private banks to provide services, according to a senior U.S. official. (Additional reporting by Marc Frank in Havana; Editing by Vicki Allen and Cynthia Osterman)