Argentina Renationalizes Its Largest Oil Company

Argentina Renationalizes Its Largest Oil Company
# 17 April 2012 07:54 (UTC +04:00)
Baku - APA-Economics. President Cristina Fernandez on Monday presented a bold plan to seize control of leading oil company YPF by nationalizing the shares owned by Spain’s Repsol, moving to expand the state’s control over Argentina’s energy reserves despite fierce criticism from abroad.

In a national address, Fernandez said that under the bill sent to congress national and provincial governments would take control of the 51 per cent of YPF shares owned by the Spanish company.

Argentina is an oil-producing nation that this year expects to import more than $10 billion worth of gas and natural liquid gas in the face of an energy crisis, according to estimates from the hydrocarbon sector. The president complained that Argentina had a deficit of $3 billion last year partly due to energy imports.

"We are the only country in Latin America, and I would say in practically the entire world, that doesn’t manage its own natural resources," Fernandez said. She said her proposal "is not a model of statism" but "the recovery of sovereignty."

But analysts said the move risks alienating foreign investors and prompting retaliation from Spain’s government.

"It is a bad decision," said Emilio Apud, a former Argentine energy secretary who now works as a consultant. "It gives the Argentine government a bad image" and will discourage investment, he said. Apud also called the proposed law "a bad way to treat friendly governments like Spain."

There was no explanation of how, or how much, Repsol and its stockholders would be compensated. Analysts say that the government might have to use Central Bank reserves, or funds from the National Social Security Administration pension fund to pay for the takeover.

Even with its share prices depressed, YPF last week were valued at $13.6 billion, and buying half of that would deplete Argentina’s treasury of funds it needs to maintain the populist subsidies that have kept the country’s economy afloat.

Repsol released a statement promising to protect the interests of its shareholders.

"Repsol considers the announced measure to be manifestly unlawful and gravely discriminatory" and contravenes the obligations undertaken by Argentina when YPF was privatized, the statement said.