While its condemnation of Cuba was muted this year, the State Department has decided to keep the island on its annual list of terrorist-hosting nations.

Placed on that blacklist for the first time in 1982, Cuba remained there for decades because it harbored a dozen members of the Basque separatist group ETA and members of the Revolutionary Armed Forces of Colombia (FARC).

But these reasons are losing force. In its latest terrorism report, released May 30, the State Department noted that “in November, the Government of Cuba began hosting peace talks between the FARC and Government of Colombia.”

It added that “reports in 2012 suggested that the Cuban government was trying to distance itself from Basque Fatherland and Liberty (ETA) members living on the island by employing tactics such as not providing services, including travel documents to some of them.”

Furthermore, said the report, “there was no indication that the Cuban government provided weapons or paramilitary training to terrorist groups.”

But it also said “the Cuban government continued to harbor fugitives wanted in the United States” a reference to a tiny group of Americans that includes Joanne Chesimard, a left-wing militant who shot and killed a state trooper on the New Jersey Turnpike 40 years ago.

Washington-based attorney Robert Muse said there’s no reason to keep Cuba on the list which also includes Iran, Syria and Sudan just because it harbors American fugitives.

He points to dozens of other nations that haven’t signed extradition treaties to the United States, including Indonesia, China, Kuwait, Vietnam and Cambodia.

“None of those countries are on the State Department’s list of terrorist-sponsoring nations,” Muse said. “So there is obviously no requirement that countries that do not extradite fugitives to the U.S. be listed as terrorist-sponsoring countries. But can it nevertheless be a valid reason for inclusion on the list? The answer, as a matter of U.S. law, is no.”

Muse also said the Castro regime refuses to extradite U.S. citizens as a direct response to U.S. rejections of its requests for Cuban citizens to be returned to the island.

Although it said Cuba has “deficiencies” in combatting money laundering, the State Department praised Cuba for joining the Financial Action Task Force of South America against Money Laundering (known by the Spanish acronym GAFISUD) last year.

This contrasts with the 2011 report , which sharply criticized Cuba for “[refusing] to substantively engage directly with the FATF.”

The State Department is required by law to give Congress an annual assessment of trends and events in overseas terrorism. Muse said the latest report’s change in tone is aimed at making it easier for the White House to take Cuba off the list if it wants to. “It seems to me, the Obama administration is opening the door,” he said.

During the Organization of American States General Assembly, held May 4-6 in Guatemala, the White House came under fire for classifying Cuba as a state sponsor of terrorism.

In addition, anti-embargo groups and liberal lawmakers have been trying to convince the administration that the island nation poses no threat to Washington.

But there are still good reasons for the United States not to delist Cuba just yet.

Among those is Cuba’s continued imprisonment of Alan Gross, a subcontractor for the U.S. Agency for International Development who was convicted of subversion and sentenced to 15 years in jail.

“There’s no upside to it,” said Eric Farnsworth, a former State Department official and now vice-president of the Americas Society. “In the current environment, I don’t see what good it would do.”

And there would be plenty of downside. Not only delisting Cuba provoke a large segment of the Cuban exile community, said Farnsworth; it would also send a conflicting signal to other countries the United States is trying to push towards democracy.

“We have a broad democratic agenda in the Western Hemisphere,” he said.

The Latin American Working Group disagrees. It reminded its supporters in a May 31 letter that Obama can take Cuba off the terrorist list at any time, despite the report.

“We don’t believe that Cuba’s inclusion in the 2012 report means that the Obama administration has discarded the possibility of delisting Cuba; we are not throwing up our hands in despair,” said Mavis Anderson, senior associate at LAWG.

“Removing or adding a country to the list is not tied to the publication of the annual report, and other major issues of importance to the president may well delay but not derail this decision.”

It’s unclear how strongly Cuba feels about its placement on the terrorist list.

All countries on the list are subject to strict sanctions but those are no more strict than the longstanding U.S. trade embargo against Cuba, which can only be ended by an act of Congress.

Farnsworth said the designation gives Cuba “a black eye” and could make other nations queasy about dealing with the island’s communist government, adding that “I don’t think they want the United States always looking over their shoulder.”