In Cuba, a post-Castro era is looming on the horizon. The Obama administration should muster the political will to prepare the United States for February 2018, when neither Fidel nor Raúl Castro will remain at the helm of the Caribbean island.

In 1960, the year Cuba's new first vice president was born, Fidel Castro had already been ruling Cuba for a year. Neither the Beatles nor the Rolling Stones had conquered rock-n-roll. Dwight D. Eisenhower led the United States, becoming the first of eleven U.S. presidents (including Obama) to apply the failed embargo policy against the Castros and the political project they represent.

But against the calendar, there are no victories. In 2006, Fidel Castro's illness forced the first transition in the Cuban leadership since 1959. Raúl, then age 76, replaced Fidel, who was almost 80. Despite the fact that it was a succession between brothers of the same generation, the presidency of Raúl Castro has had important consequences. Faced with the loss of Fidel's charismatic leadership, the Cuban Communist Party (PCC) began economic reform and political liberalization. It was an effort to rebuild their capacity to govern under the new conditions.

In the last five years, the Cuban government has created an important institutional foundation for a parallel transition to a mixed economy (symbolized by the encouragement of non-state-sector firms) and a post-totalitarian relationship between the state and civil society (symbolized by relaxed travel restrictions).

With the election of a new Council of State in February, the last phase of the transition to the post-Castro era began. Raúl Castro was reelected to the presidency, and for the first time a leader born after 1959, Miguel Díaz-Canel, became his second in command. Although this gradual transition is unfolding with the same party and president in power, one can begin to discern a new leadership and changing priorities.

Looking at the Communist Party as a corporation (an analogy that should not be abused), Díaz-Canel is a manager who has served at various levels of the production chain. He worked at its foundation, as a university teacher and youth leader. Later, in the strategic provinces of Villa Clara and Holguin, he administered the implementation of economic reforms and directed the opening of the economy to foreign investment and tourism—all while maintaining party control over both processes.

Díaz-Canel is part of the network of provincial party czars who are important in the implementation of the proposed changes, particularly decentralization. Having worked in central and eastern Cuba, the new first vice president has cordial ties with regional commanders of the armed forces—the other pillar, along with the Communist Party, of the current Cuban system. He is a civilian, the first in the line of succession to have little military experience. But he is steeped in the networks of power and well versed in carefully managing reform.

Challenges for Cuban Leaders

If Cuba implements the type of mixed economy proposed by the last Congress of the Communist Party—a new, more vital relationship with its diaspora and the world—it may also experience a political transformation. As the economy and society change, the political status quo cannot hold. The rise of market mechanisms and an autonomous non-state sector will reinforce the newly open flows of information, investment and technology. These new sectors will seek representation in the political arena. Citizens will have greater access to the Internet, and will be able to associate more horizontally.

For at least the next five years, this does not imply a transition to multiparty democracy. But economic liberalization will force an expansion of the current system. Economic and migration opportunities will channel some of the energy in the direction of new businesses and travel, but it will not be enough. The party system will be reformed in order to remain at the helm of social and economic life. Political liberalization will probably start in the lower rungs of government, allowing citizens to vent their frustrations at that level. Raúl Castro’s decision to limit leadership positions to two terms, at a time when the older generation is leaving power by attrition, will result in a more institutionalized leadership that promotes younger leaders in an orderly fashion.

Time for Presidential Action

In this new context, the United States should open a path for those regime voices who have an interest in backing more serious reforms. Washington should weaken the naysayers within the Cuban elites by showing what Cuba can gain through opening up. This requires a U.S. willingness to test Havana with real incentives in ways it has not done since the Ford and Carter Administrations.

Washington's current strategy—ignoring Raúl Castro's promarket moves and using USAID regime-change programs to meddle in Cuba's domestic politics—is yielding diminishing returns. The United States would gain more by allowing its own business community to trade and invest in the emerging Cuban non-state sector and beginning a limited engagement with the new leaders in Havana. A dynamic Cuban market would whet corporate appetites and put the U.S. embargo against the island in jeopardy. This vision lines up with the criticism of Cold War-era U.S. Cuba policy expressed in the past by President Obama and his new secretaries of state and defense, John Kerry and Chuck Hagel.

The opportunity to redesign U.S. policy towards Cuba will not last forever. A failure to respond to Raúl Castro’s overtures for negotiation with Washington would be a strategic mistake. Unfortunately, the 1996 Helms-Burton law codified the embargo as a legislative act, limiting presidential authority to terminate sanctions in response to changing conditions. But President Obama still can make a significant difference in bilateral relations if he decided to lead on the issue by using his prerogative as a diplomat-in-chief.

The president can begin by taking Cuba off the State Department list of state sponsors of terrorism. It would be a positive gesture towards Havana and a signal to the world that he meant what he said when he advertised a new diplomatic approach towards U.S. adversaries. It will not be a concession to Cuba, since Havana has not been connected to any terrorist actions for at least the last twenty years. The misuse of the list to serve the agenda of the pro-embargo lobby undermines its credibility against real terrorist threats.

Taking Cuba off the State Department terror-sponsor list also will provide a framework to negotiate the Alan Gross affair. Gross, a USAID subcontractor, is serving a fifteen-year prison sentence in Havana. He was arrested by Cuban authorities because of his covert mission providing satellite access to internet to several Cuban civil-society groups, circumventing government controls. The Cuban government admits that Gross was not a spy but found that his actions could make Cuba vulnerable to cyber warfare by the United States. Gross’s activities are provided for under section 109 of the Helms-Burton law, a program designed to promote regime change on the island.

Negotiation on the Gross case is held up because of the false premise that he is a hostage of a terror-sponsoring nation. But the situation might become manageable if the two countries negotiate an agreement that could be face-saving for both governments. Such an agreement could be the first step in a course of engagement and people-to-people contact. If the United States is to have some influence during the transition to a post-Castro Cuba, it must start this process today.

Arturo López-Levy is a PhD candidate at the Josef Korbel School of International Studies at the University of Denver. He is coauthor of the book Raúl Castro and the New Cuba. Twitter: @turylevy.