Obama touts clean energy in bid to restore U.S. leadership in Caribbean

KINGSTON (Reuters) - President Barack Obama met with Jamaica's prime minister on Thursday, announcing a major clean energy partnership ahead of a Caribbean summit where he hopes to reassert U.S. leadership in the region at a time when oil-producing Venezuela's economic clout may be receding.

The White House used the occasion to announce a major step towards healing its five-decades-old rift with Cuba, saying the State Department has completed a review of whether to remove the communist-ruled island from a state sponsors of terrorism list.

The review has been forwarded to the White House, where it is being studied by policy aides before a formal recommendation. A green light for Havana's removal would open the door to the restoration of diplomatic relations between the United States and Cuba after 54 years.

Obama is headed to Panama later Thursday to attend a Western Hemisphere summit, where he will cross paths with Cuban President Raul Castro for the first time since the two announced a historic opening between their countries in December.

In Kingston, Caribbean leaders were largely supportive of U.S. détente with the region's most populous island nation.

"You are on the right side of history," Jamaican Prime Minister Portia Simpson Miller told Obama after their talks, praising him for his Cuba outreach.

As the first U.S. president to visit Kingston since Ronald Reagan in 1982, Obama faces the challenge of convincing Caribbean island leaders that Washington is genuinely re-engaging after a long period of perceived neglect of its smaller, poorer neighbors.

Crowds assembled along the route of Obama's motorcade on Thursday morning to watch and snap photos.

"It is a great pleasure to visit Jamaica, known for its beauty and the extraordinary spirit of it's people," Obama wrote in a guestbook at Jamaica House where he was met by Simpson Miller.

Obama paid homage to legendary reggae singer Bob Marley immediately after landing on Wednesday night, making an unannounced stop at the house in Kingston where the dreadlocked musician lived until his death in 1981.

During his 24-hour visit Obama is attending a meeting of the 15-member Caribbean Community, or Caricom, to discuss energy, security and trade.

His meeting with Simpson Miller focused on improving energy security, reducing energy costs, and fighting climate change, the White House said, announcing a $20 million facility to encourage investment in clean energy projects.

The United States will also partner with Caribbean and Central American countries on energy sector reform, regional integration and clean energy projects.

Some analysts say a key reason why Washington is suddenly paying attention to the Caribbean Basin is it wants to wean the islands off dependence on cut-rate Venezuelan oil that Caracas has long used to wield influence in the region.

Many Caricom members participate in Venezuela's discounted Petrocaribe oil program, but Caracas now finds itself in growing economic distress due to low oil prices.

"The dependence in the last decade on subsidized oil imports that are starting to go away will have pretty big macro-economic effects," said Daniel Restrepo, Obama's former top adviser for Latin America.

The Obama administration launched the Caribbean Security Energy Initiative last year. In January Vice President Joe Biden hosted Caribbean leaders in Washington to discuss alternative energy sources such as wind and solar.

Jamaica's energy minister Phillip Paulwell was quoted in local media saying any deals with the United States did not mean Jamaica was distancing itself from Venezuela.

"We do intend to maintain our strong relationship with Venezuela as we build on this new area of relationship with the United States," Paulwell told The Gleaner.

Venezuelan President Nicolas Maduro has made clear he will confront Obama this week at the Summit of the Americas over new U.S. sanctions against Venezuelan officials.

While Maduro may try to upstage the rapprochement between Washington and Havana which threatens to undermine his longstanding alliance with Castro, he's likely to get push-back from regional leaders who welcome better U.S.-Cuba relations.

"The thaw between Washington and Cuba trumps all other issues," said Michael Shifter, president of the Inter-American Dialogue think tank in Washington. "However close Havana’s ties with Venezuela are, I don’t think the Cubans want to do anything to upset Obama’s new Cuba policy."

(This story has been refiled to correct paragraph 1 to insert dropped word "a")

(Additonal reporting by Aileen Torres-Bennett in Kingston Writing by David Adams; editing by Andrew Hay)