A barber shaves a client's head in Havana, as news spreads of restored relations with the US. Source: AP

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

“We are all Americans,” Mr Obama declared, breaking into Spanish.

Cuba’s Raul Castro, speaking at the same time in ­Havana, said the former ­enemies had “agreed to re-establish diplomatic ties” after 50 years of rancour.

“President Obama’s decision deserves the respect and acknowledgment of our people,” Mr Castro said, while warning that the embargo — which he calls a “blockade” — must still be lifted.

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“We will end an outdated ­approach that for decades has ­failed to advance our interests and ­instead we will begin to normalise relations between our two countries,” he said.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

Mr Obama later raised the hitherto unthinkable prospect of a US president embarking on a visit to Cuba, saying nothing was ruled out.

“I don’t have any current plans, but let’s see how things evolve,” he told ABC’s World News Tonight.

Plaudits for the policy shift poured in from all corners of the globe.

The EU, which is also moving to normalise ties with Cuba, hailed the breakthrough as a “historical turning point.”

Chile’s Foreign Minister, Heraldo Munoz, spoke for Latin Americans frustrated by the diplomatic divide, declaring: “This is the beginning of the end of the Cold War in the Americas.”

Mr Obama and Mr Castro praised the help given by the Pope, the first Latin American pontiff, and the Catholic Church in brokering better relations ­between the long-time enemies.

The surprise 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.

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

Senior Democrat Dick Durbin, a member of the Senate foreign ­relations committee, hailed the move as creating a “force for positive change in Cuba.”

Republicans denounced the deal, however, in a foretaste of the resistance Mr 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 of Representatives Speaker 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”. Mr Castro urged Mr 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 Mr Gross, who had been held for five years for spying, was welcomed back on to US soil at an air base outside Washington by Secretary of State John Kerry.

Mr Gross welcomed the new spirit of dialogue, saying: “In all seriousness, this is a game-­changer, which I fully support.”

Mr Kerry said: “I look forward to being the first secretary of state in 60 years to visit Cuba.”

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

Mr Obama called the Cuban one of the US’s most important agents on the island.

In exchange for this prisoner, the US released the three Cuban agents, who were welcomed by Mr Castro at Havana’s airport as they returned to Cuba.

Mr 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.

AFP