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By Steve Holland

WASHINGTON, Dec 18 (Reuters) - Potential 2016 Democratic presidential candidate Hillary Clinton knows a political gift when she sees one.

She was quick to embrace the step this week when President Barack Obama, a fellow Democrat no longer having to face an electorate, relaxed U.S. policy toward Cuba.

While assailed by Republicans opposed to restoring ties with the communist-led island, the action has the power to solidify support for Democrats among increasingly influential Latino voters and appeal to voters in farm states like Iowa eager to do business in Havana.

Obama's unilateral move has gently shaken up the 2016 race to succeed him, exposing divisions among Republicans and possibly helping Democrats already buoyed by his decision to liberalize immigration policy.

Potential contenders Jeb Bush and Marco Rubio adhered to the traditional Republican hard line on Cuba and sharply criticized Obama. But Kentucky Senator Rand Paul, who has a libertarian streak, backed the new policy.

A likely White House candidate, Paul told a West Virginia radio station that the 50-year-old embargo with Cuba "just hasn't worked."

Clinton, Obama's former secretary of state, also had asserted the previous policy was not working. In her memoir, "Hard Choices," she wrote that she urged Obama to shift. She welcomed the change in a statement on Wednesday.

Democrats argue that Clinton's embrace of Obama on Cuba could help her with Latino voters, especially younger ones in the key state of Florida, who are less inclined than their elders to be virulently opposed to the Cuban government.

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With Cuba Decision, Obama Hands Hillary Clinton A 2016 Gift