U.S. President Barack Obama says that the "rigid" policy the U.S. has had toward Cuba over the past decades has had little effect. 

In a speech delivered at the White House on Wednesday, Obama outlined some steps his administration will be taking to normalize full diplomatic relations with Cuba, marking the most significant shift in U.S. policy toward the communist island in decades.

"These 50 years have shown that isolation does not work,” he said, referring to the sanctions and travel bans the U.S. imposed on Cuba.

The announcement comes amid a series of new confidence-building measures between the longtime foes, including the release of American Alan Gross and the freeing of three Cubans jailed in the U.S.

Senator Marco Rubio, a Republican and possible 2016 presidential contender, said the U.S. and Cuba were moving toward normalized banking and trade ties. He also said the U.S. was poised to open an embassy in Havana in the coming months.

"This is going to do absolutely nothing to further human rights and democracy in Cuba," Rubio said in an interview. "But it potentially goes a long way in providing the economic lift that the Castro regime needs to become permanent fixtures in Cuba for generations to come."

Gross, 65, was on an American government plane bound for the U.S. Wednesday morning after being released on humanitarian grounds by the Cuban government at the request of the Obama administration. As part of the secret negotiations to secure his release, the U.S. was releasing three Cuban jailed in Florida for spying.

Cuba President Raul Castro planned to speak at noon about Gross's release, according to Cuba's UN mission.

Obama administration officials have considered Gross's imprisonment an impediment to improving relations with Cuba.

Cuba was also releasing a non-American intelligence "asset" along with Gross, according to a U.S. official. That official and others spoke on the condition of anonymity because they were not authorized to be identified by name before Obama's remarks.

USAID contractor Gross freed after 5 years

Gross was detained in December 2009 while working to set up internet access as a subcontractor for the U.S. government's U.S. Agency for International Development, which does work promoting democracy in the communist country. It was his fifth trip to Cuba to work with Jewish communities on setting up internet access that bypassed local censorship.

Cuba considers USAID's programs illegal attempts by the U.S. to undermine its government, and Gross was tried and sentenced to 15 years in prison. 

American aid worker Alan Gross, pictured in 2012, has been released from Cuba after five years in prison, amid reports of a prisoner exchange between the countries that heralds a major overhaul of U.S. policy toward Cuba. (James L. Berenthal/Associated Press)

The three Cubans released in exchange for Gross are part of the so-called Cuban Five — a group of men who were part of the "Wasp Network" sent by Cuba's then president Fidel Castro to spy in South Florida. The men, who are hailed as heroes in Cuba, were convicted in 2001 in Miami on charges including conspiracy and failure to register as foreign agents in the U.S.

Two of the Cuban Five were previously released after finishing their sentences.

In a statement marking the fifth anniversary of Gross's detention earlier this month, Obama hinted that his release could lead to a thaw in relations with Cuba.

"The Cuban government's release of Alan on humanitarian grounds would remove an impediment to more constructive relations between the United States and Cuba," Obama said in a statement.

Gross's wife, Judy, said in a statement earlier this month that he has lost more than 46 kilograms, can barely walk due to chronic pain, and has lost five teeth and much of the sight in his right eye. He has begun refusing to see his wife and daughter, the new chief of the U.S. Interests Section in Havana and members of Cuba's small Jewish community, who had been visiting him on religious holidays.

Canada hosted majority of U.S., Cuba meetings 

Obama has taken some steps to ease U.S. restrictions on Cuba after Raul Castro took over as president in 2010 from his ailing brother. He has sought to ease travel and financial restrictions on Americans with family in Cuba, but has resisted calls to drop the embargo. 

In this image from TV, U.S. President Obama shakes hands with Cuban President Raul Castro in Soweto, South Africa, for a memorial service for former South African president Nelson Mandela on Dec. 10, 2013. The handshake between the leaders of the two Cold War enemies came during a ceremony that focused on Mandela's legacy of reconciliation. (Associated Press)

 

Among the expected changes as a result of the improvement in U.S.-Cuba relations is that licensed American travellers to Cuba will now be able to return to the U.S. with $400 in Cuban goods, including tobacco and alcohol products worth less than $100 combined. This means the long-standing ban on importing Cuban cigars is over, although there are still limits, according to a U.S. official who spoke on condition of anonymity ahead of the official White House announcement.

Canada hosted the majority of the meetings between the U.S. and Cuba that led to the start of normalizing full diplomatic relations, officials said on Wednesday.

In a conference call, high-ranking officials said there were multiple meetings with Cuban officials in third countries. Canada hosted the majority of these meetings, the officials said anonymously on background.

Canada did not participate in the substance of the discussions, but played an indispensable role in facilitating and hosting the talks, the officials said.

There were no meetings in Cuba or the United States.

The surprise prisoner swap has echoes of the deal the U.S. cut earlier this year to secure the release of Army Sgt. Bowe Bergdahl, who had been held by the Taliban. In exchange for his release in May, the U.S. turned over five Taliban prisoners held at the Guantanamo Bay detention centre.