Tourists ride in a vintage car as it passes in front of a picture of Venezuela's late president Hugo Chavez hung at the Venezuelan embassy in Havana, Cuba, July 21, 2017. REUTERS/Alexandre Meneghini

HAVANA (Reuters) - Cuban trade with socialist ally Venezuela has fallen 70 percent since 2014 due to the South American oil producer’s inability to meet delivery contracts and purchase goods as it struggles with low oil prices and a resulting economic meltdown.

A cash crunch and lower oil supplies from Venezuela have forced the Communist-run Caribbean island to slash imports and reduce the use of fuel and electricity, helping tip its centrally planned economy into recession in 2016 for the first time in nearly a quarter century.

Merchandise trade with Venezuela fell to $2.2 billion in 2016, compared with $4.2 billion the year before and $7.3 billion in 2014, the Cuban National Statistics Office reported on its website this week (here).

A strategic alliance formed by the two countries’ former leaders, Fidel Castro and Hugo Chavez - who have since died - resulted in the Caribbean island importing all its oil from Venezuela in exchange for medical and other professional services, with the oil factored in as merchandise in trade reports.

Under the agreement, Cuba also began exporting pharmaceuticals and other products to Venezuela.

Venezuelan exports to Cuba, almost exclusively oil-related products and reflecting both a 40 percent decline in deliveries and low prices, fell to $1.6 billion last year, compared with $2.8 billion in 2015 and $5.1 billion before the crisis began.

Cuban exports to Venezuela declined to $642,000 last year, compared with $1.4 billion in 2015 and $2 billion in 2014.

The government report said Cuba’s overall trade in goods last year was $12.6 billion, compared with $15 billion in 2015.

The economy expanded 1.1 percent through June this year, the government reported, but it added that continuing financial difficulties meant austerity measures remained in force and could be broadened.