Argentina's takeover of its formerly state-owned energy company from Spanish shareholders won easy approval from legislators Thursday night.
Congress' lower house voted 207-32 to give the force of law to what President Cristina Fernandez surprisingly decreed two weeks earlier: the expropriation of the Spanish company Repsol SA's $10.5 billion stake in the YPF oil company, without a single centavo paid in advance. The expropriation measure was worded to make any energy company operating in Argentina a potential target for government intervention. It declares that guaranteeing Argentina's energy self-sufficiency is a national priority that must be supported by private industry as well.
Since the government has kept energy prices far below the global market for nearly a decade, this means companies must sell energy extracted in Argentina to Argentine consumers first, even if it means missing out on exports that could bring far-higher returns. "This decision is going to require all Argentines, and especially those who have institutional responsibilities, whether in the government or opposition, to face the challenge of building a YPF that is modern, competitive, (and) aligned with the interests of the country," Fernandez said.
Spain and the European Union have threatened to retaliate for the so-far-uncompensated takeover from Spain's biggest company. Moody's rating service increased its country risk estimate for trading with Argentina. But the measure is highly popular at home, where even lawmakers uncomfortable with the government's methods and intentions described it as a historic recuperation of Argentina's national sovereignty. The country previously took over Aerolineas Argentinas, the private pension system in 2008, and a privatized water system in 2006. Only a few legislators worried about the expropriation. Buenos Aires Mayor Mauricio Macri, leader of the PRO party, told reporters before the vote that the expropriation "will turn away the investments that bring jobs." "When you act with arrogance, illegality and intolerance, as has been done with YPF, what you get is exactly the opposite," Macri said.
So far, Spain's only retaliatory move has been to announce the cutback of biodiesel imports from Argentina. Fernandez scoffed at that, saying Spain is free to buy more expensive soy wherever it wishes. Spanish Deputy Prime Minister Soraya Saenz de Santamaria said political and diplomatic retaliatory measures also were under consideration. Repsol, for its part, said it would have no comment on congressional approval. A spokesman in Madrid also declined to comment on reports that the company was cancelling shipments of natural gas to Argentina.
Speaking Thursday, Spanish Foreign Minister Jose Manuel Garcia-Margallo said it is "perfectly legitimate" for countries to control their energy sectors, as long as they pay in full for any property taken. "If they decide to expropriate, what they have to do is pay a fair market value, which is what is done in international relations," he told reporters, noting that Bolivia appeared to be willing to pay fairly for expropriating that country's main power grid from the Spanish-owned Red Electrica SA. Garcia-Margallo suggested Argentina might "get an independent company to make an estimate and pay a fair market value" for YPF.
Argentina officials have rejected that idea. First, they say they will study the company's books, and deduct any debts or environmental damage from the total. Then, they will present the numbers to an Argentine court to settle on a price, said Axel Kicillof, a presidential appointee who is helping to run YPF through its transition. In Washington, State Department spokesman Mark Toner said Thursday that "these actions against foreign investors really dampen the investment climate in Bolivia, in Argentina, in wherever. So that's our concern."