* Cuban leaders pillory Obama for lack of policy change
* Fate of detained U.S. contractor could be key for ties
* Analysts say Obama should keep communication open
By Jeff Franks
HAVANA, Jan 11 (Reuters) - A chill reminiscent of the Cold War is back in U.S.-Cuban relations after hopes for warmer ties under U.S. President Barack Obama dissipated amid familiar disputes over the U.S. trade embargo, terrorism and spying.
After a year of relative civility and cautious praise for Obama, Cuban leaders are again angrily upbraiding Washington over the arrest of an American contractor in Havana last month and over Cuba's objection to being included in a U.S. list of nations considered "state sponsors of terrorism."
Cuba protested to the top U.S. diplomat in Havana against its "unjust" inclusion on the list, which will mean extra security measures for U.S.-bound air passengers from Cuba following a botched Christmas Day bomb attack aboard a U.S.-bound airliner.
Havana has also revived accusations of hostile U.S. spying and "subversion" by saying the contractor, who it says was arrested last month for distributing satellite communications equipment to Cuban dissidents, worked for "American secret services." Washington denies the man was a spy.
Whether the turn for the worse is just a bump in the road or signals a slide back to normally bad U.S.-Cuba relations will depend on how Obama responds to Cuba and what the communist-led island does with the contractor, analysts said.
If Cuba throws him in prison for a long sentence, U.S.-Cuba relations would almost certainly suffer.
"Given the sensitive nature of the case, it is clear both sides are going to be treading very carefully and any plans for bold diplomatic outreach are likely to be put on hold," said Dan Erikson at the Inter-American Dialogue think tank in Washington.
HISTORY OF HOSTILITY
There has been speculation Cuba could use the contractor as a bargaining chip to try to secure release for five convicted Cuban intelligence agents serving long U.S. sentences for espionage charges that linked them to Havana's 1996 shoot-down of private planes piloted by Cuban exiles near Cuba.
The latest tensions illustrate how a turbulent history weighs on U.S.-Cuba ties and complicates attempts at change.
Cuban President Raul Castro said the case of the contractor, whose name has not been released, showed Washington had not abandoned its policy of trying to overthrow the Cuban socialist system established after the 1959 revolution.
"The encouragement of open and undercover subversion in Cuba is growing. The enemy is as active as ever," Castro said in a Dec. 21 speech to the Cuban parliament.
The arrested man's employer, Maryland-based Development Alternatives Inc, said he was visiting the island under a U.S. federal program to "strengthen civil society in support of just and democratic governance in Cuba."
Stepping up its criticism of the U.S. president, Cuba has said it is angry with Obama because, despite his stated desire last year to seek a "new beginning" with the island, he has not ended old policies that have long blocked better ties.
Cuban Foreign Minister Bruno Rodriguez last month slammed Obama as "imperial" and "arrogant," using terms that were often hurled by Havana at his predecessor George W. Bush.
Cuba's inclusion on the U.S. terrorism list goes back to 1982. It was placed there under President Ronald Reagan due to U.S. worries about communist influence in Central America.
Phil Peters at the Lexington Institute think tank in Arlington, Virginia, said Obama needed to move ahead with a full overhaul of Cuba policy promised by U.S. Secretary of State Hillary Clinton during her confirmation hearings.
'ENCRUSTED POLICY'
"The fact is that President Obama takes office with 50 years of encrusted policy that just cries out for review, and a lot of it should just be thrown overboard," Peters said.
Erikson said Cuba also needs to do more. Obama's overtures so far "have been ridiculed and denounced by top Cuban leaders, which has dampened any enthusiasm for greater outreach by the U.S.," he said.
Obama's Cuba policy initiatives have been modest, limited to a slight easing of the long-standing U.S. trade embargo against Cuba by lifting restrictions on Cuban American travel to the island and remittances sent to relatives.
He also has initiated talks on migration and possible resumption of U.S.-Cuba mail service, and cleared the way for U.S. telecommunications companies to operate in Cuba.
Analysts say Obama has more pressing domestic and foreign priorities to tackle than Cuba and also faces pressure at home from legislators and groups opposed to change in Cuba policy.
But Cuba-watchers say "people-to-people" contact could still be increased by loosening the U.S. travel ban in place for most Americans as part of the embargo dating back to 1962.
"If you want to bring about change, change by example," said Florida cattleman John Parke Wright, a frequent visitor to Cuba. "Let American business and tourism flourish, and I guarantee there'll be changes here (in Cuba)." (Editing by Pascal Fletcher and Mohammad Zargham)