The US will remove Cuba from its list of state sponsor of terrorism, Joe Biden has said in one of his final official acts as president.
In return, Cuba announced it would release 553 prisoners.
The deal, which was brokered by the Catholic Church, comes just days before president-elect Donald Trump is due to be sworn in.
During his first presidential term, Trump reinstated Cuba to the US list of state sponsors of terrorism, and it is not clear if he will reverse Biden’s move once back in power.
Trump’s choice for national security adviser, Mike Waltz, said on Fox News that “anything they [the Biden Administration] are doing right now we can do back, an no one should be under any illusion in terms of a change in Cuba policy”.
An official from the Biden administration said that in return for its removal, Cuba would “gradually” release 553 prisoners “who have been detained unjustly”.
Cuba’s ministry of foreign affairs said that the deal “puts an end to specific coercive measures” that it said damaged the country’s economy.
Havana did not release any details as to whom it may free but relatives of people imprisoned following anti-government protests in 2021 said they hoped their loved ones would be among them.
Liset Fonseca, whose 41-year-old son was sentenced to 10 years in jail after taking part in the 2021 protests said that “all the mothers of prisoners want our children to be free and out of that suffering, out of that hell that is the prisons in Cuba”.
“They should never have been in prison,” she told AFP news agency.
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Cuba currently sits alongside North Korea, Syria and Iran on the US State Sponsors of Terrorism list.
This means they are deemed by the US to have “repeatedly provided support for acts of international terrorism”.
Adding Cuba back to the list after its removal in 2015 by President Barack Obama, Trump citied the communist country’s backing of Venezuelan leader Nicolas Maduro.
At the time Cuba called the move “cynical,” “hypocritical” and an act of “political opportunism”.
Alongside prompting the prisoner release, this decision is also significant because it can be seen as a step towards normalising relations between Cuba and the US.
This could pave the way for dialogue on other contentious issues.
It could also help Cuba’s dire economic situation, as some major banks and foreign investors have struggled to operate there legally.
Biden is to notify Congress of his plans, which also include reversing Trump-era financial restrictions on some Cubans, a White House statement said.
He will also suspend the ability of individuals to make claims to confiscated property in Cuba, the statement read.
