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Update: US, Cuba move to end Cold War stand-off

[WASHINGTON] The United States and Cuba moved to end five decades of Cold War hostility Wednesday, agreeing to revive diplomatic ties in a breakthrough that would also ease a crippling US trade embargo.

In the wake of a prisoner exchange, President Barack Obama said Washington was ready for a "new chapter" in relations with Cuba and would re-establish its embassy in Havana, shuttered since 1961.

"We are all Americans," Obama declared, breaking into Spanish for a speech that the White House portrayed as a bid to reassert US leadership in the Western Hemisphere.

Cuba's President Raul Castro, speaking at the same time in Havana, confirmed that the former enemies had "agreed to re-establish diplomatic ties" after a half century of rancor.

"President Obama's decision deserves the respect and acknowledgement of our people," Castro said, while warning that the embargo - which he calls a "blockade" - must still be lifted.

In Washington, Obama admitted the US trade ban had failed and said he would urge Congress to lift it, while using his presidential authority to advance diplomatic and travel links.

"We will end an outdated approach that for decades has failed to advance our interests and instead we will begin to normalise relations between our two countries," Obama said.

"Through these changes, we intend to create more opportunities for the American and Cuban people and begin a new chapter among the nations of the Americas." The European Union, which is also moving to normalize ties with Cuba, hailed the breakthrough as a "historical turning point." In Havana, Cubans erupted in celebration.

"I have goosebumps all over," said Ernesto Perez, 52, who works at a cafeteria in Havana's historic city center.

Chile's Foreign Minister Heraldo Munoz spoke for those in Latin America who are frustrated by the diplomatic divide, declaring: "This is the beginning of the end of the Cold War in the Americas." Obama and Castro hailed the help given by Pope Francis, the first Latin American pontiff, and the Catholic Church in brokering better relations between the long-time enemies.

In response, the Vatican said the pope warmly congratulated both governments for overcoming "the difficulties which have marked their recent history." Canada was also praised for hosting talks between the sides.

The breakthrough came after Havana released jailed US contractor Alan Gross and a Cuban who spied for Washington and had been held for 20 years - one of the most important US agents in Cuba.

Havana also agreed to release dozens of political prisoners, a senior US official said.

The United States in turn released three Cuban spies, and Obama said he had instructed the US State Department to re-examine its designation of Cuba as a state sponsor of terrorism.

The United States imposed a trade embargo against Cuba - the Cold War foe closest to its shores - in 1960 and the two countries have not had full diplomatic relations since 1961.

The ensuing stand-off was marked by incidents that threatened to turn the Cold War hot.

CIA-backed Cuban exiles suffered a bloody defeat in the Bay of Pigs invasion and during the 1962 "Missile Crisis," US warships blockaded the island to prevent the delivery of Soviet nuclear arms.

The embargo hurt the Caribbean island state's economy, but it failed to unseat the communist governments led by the Castro brothers.

Obama now has only two years left in office, Cuba's revolutionary leader Fidel Castro is 88 and ailing and his brother Raul is 83.

With their window for action closing, both sides were under pressure to make a gesture.

Senior Democratic lawmaker Dick Durbin, a member of the Senate foreign relations committee, hailed the move as creating a "force for positive change in Cuba." But Republicans quickly denounced the deal, in a foretaste of the resistance that Obama will face as he tries to persuade Congress to back a full end to the embargo.

"The White House has conceded everything and gained little," said Cuban-American Senator Marco Rubio.

House leader John Boehner called the deal "another in a long line of mindless concessions to a dictatorship that brutalises its people and schemes with our enemies." Castro urged Obama to work around Congress, saying: "Though the blockade has been codified into law, the President of the United States has the executive authority to modify its implementation." The 65-year-old Gross, who had been held for five years for spying, was welcomed back onto US soil at an airbase outside Washington by Secretary of State John Kerry.

Gross welcomed the new spirit of dialogue, saying: "In all seriousness, this is a game-changer, which I fully support." For his part, Kerry said: "I look forward to being the first Secretary of State in 60 years to visit Cuba." And White House spokesman Josh Earnest said Obama himself "would not rule out" a visit.

Also returning was an unnamed intelligence agent who had caught working for the US in Cuba and held for two decades.

Obama called the Cuban one of the United States' most important agents on the island.

In exchange for this prisoner, the United States released three Cuban agents, who were welcomed as heroes in the homeland.

Gross was arrested in 2009 for distributing communications equipment to members of Cuba's Jewish community while working as a contractor for the US Agency for International Development.