Argentina’s government made official its plan to take control of the nation’s largest oil company, YPF, provoking a diplomatic crisis with Spain, where the company’s largest shareholder is based.
In a televised address from the presidential palace in Buenos Aires, President Cristina Fernandez de Kirchner said she would ask the country’s congress to approve a law to nationalize a 51% controlling interest of YPF, justifying it by declaring that oil production was in the national interest.
What was not clear Monday was how much the government would pay majority owner Repsol and how soon. Shares of YPF have fallen sharply since rumors of nationalization began circulating several months ago, cutting the value of Repsol’s investment by more than half.
Fernandez framed the takeover as a move necessitated by the failure of Repsol and other companies to invest adequately in oil and gas production, resulting in a doubling of imports last year.
But industry analysts blamed government price controls and consumer subsidies that cut company profits and acted as disincentives to invest.
“We are the only country in Latin America, and I might say the world, that doesn’t control its natural resources,” Fernandez said.
The Spanish government reacted harshly to the planned takeover and hinted it would soon take retaliatory measures. Industry minister Jose Manuel Soria said Monday that the plan was viewed not just as a hostile act against Repsol but “against Spain and the Spanish government as well.”
After an emergency Cabinet meeting called by Spanish Prime Minister Mariano Rajoy, foreign minister Jose Manuel Garcia-Margalla said the takeover “breaks the climate of cordiality and friendship between Argentina and Spain,” adding his government would take “clear and convincing measures in coming days.” What those measures could include was not clear.
“This decision destroys the climate of confidence necessary to attract investment,” Garcia-Margalla told reporters. “It’s a terrible decision for Spain, for Argentina and a horrible decision for juridical security which must reign in business.”
In her speech to Argentina, Fernandez also declared an emergency “intervention” in YPF management, which over the next 30 days will give her government provisional control of the company until a law is passed and a majority of shares in the company are purchased. The action was necessary to “preserve assets and patrimony” and to ensure fuel supplies, she said.
According to Platts, an oil industry publisher, YPF pumps about one-third of the 570,000 barrels of oil that Argentina produces on average daily as well as a quarter of all natural gas.
Repsol acquired its 57% stake in YPF in 1999 for $13 billion, and the company now represents about one quarter of its revenue and oil production worldwide. Repsol said it has invested $11 billion since the acquisition. The company is also active elsewhere in Latin America, including in Peru, Brazil and Colombia.
Kraul and d’Alessandro are special correspondents. Kraul reported from Bogota, Colombia, and d’Alessandro from Buenos Aires.