EU slams Argentina’s YPF seizure, eyes reprisals

EU slams Argentina’s YPF seizure, eyes reprisals

A woman walks behind a billboard with a picture of Argentina’s President Cristina Fernandez that reads “For what we’ve done and what we have to do” in Buenos Aires. (Photo: Reuters)

April 20, 2012, Friday/ 16:08:00/ AP

The European Parliament on Friday condemned Argentina's decision to expropriate a controlling stake in oil company YPF from Spanish-owned Repsol and urged the executive European Commission to consider reprisals.

In a resolution approved by a vote of 458 to 71, politicians "deplored" the decision by Argentine President Cristina Fernandez, calling it "unilateral and arbitrary". Madrid has already threatened retaliation over the move and a senior Spanish official said on Thursday the European Union would intervene on Spain's behalf over the seizure. The parliament urged the Commission to use "all the available settlement tools within the World Trade Organization and G20" to react to the seizure, which it said failed to follow the country's "obligations stemming from international agreements". The nationalization could affect talks underway on a trade deal between the EU and the Mercosur bloc of Latin American countries led by Brazil and Argentina, as well as the system of preferential tariffs the zone benefits from in dealing with the EU, the resolution said.

Referring to the "deep friendship which links the EU and the Argentine Republic", the parliament also urged Fernandez's government to "renew dialogue and negotiation". The European parliament called the re-nationalization "an attack on the exercise of free enterprise and the principle of legal certainty" which hurt Argentina's investment climate. The resolution, backed by the major parties in the Strasbourg-based legislature, also calls on European Commission to take up the issue at the WTO and the G20 trade organization and explore measures to better protect EU interests in future. The Group of 20 industrial powers has a summit in Mexico in June and could bring Argentine President Cristina Fernandez and Spanish Prime Minister Mariano Rajoy together face to face for the first time.

Meanwhile, Repsol's shares continued to tumble Friday , down 1 percent from Thursday's 14.52 euros. Earlier in the week, they fell between 4 and 6 percent every day since Argentina made the announcement on Monday it was taking control of YPF. The European parliament complained that Repsol had "been the target of a public harassment campaign" in Argentina, resulting in the plummeting of its shares. Spain is the top foreign investor in Argentina, ahead of the United States. Spanish direct investment in Argentina totaled $23 billion in 2010. That was 26.3 percent of the total invested in that country, compared with 16.8 percent for the United States, according to the Argentine central bank. Repsol shares have tumbled 17 percent this week, and Standard and Poor's downgraded the company's stock Thursday to one step above junk. But YPF shares closed nearly 10 percent higher at $14.42 in New York trading Thursday after losing half their value earlier in the week.

Argentina's Senate is fast-tracking the expropriation measure, with only a handful of lawmakers opposed ahead of a floor vote next Wednesday. Some opposition members complained it seemed hastily prepared, but said they would vote for it anyway. Even Mauricio Macri, the Buenos Aires mayor who hopes to oust the government in 2015, said Thursday in a radio interview that he would keep YPF state-owned if elected, "now that the damage is done." Sen. Anibel Fernandez said authors of the bill initially did not realize that YPF Gas SA, the nation's largest natural gas distributor, was separate from Repsol-YPF's Argentine oil operations, so its expropriation was added to the legislation at the last minute. The Spanish company had no immediate reaction to the addition of the gas company to the expropriation legislation. "We are not commenting," a Repsol spokesman, Kristian Rix, said in Madrid. Spain's prime minister, Mariano Rajoy, again criticized Argentina's plan. It "isn't just not good for Spain, because it isn't," Rajoy said. "But it is much worse ... for Argentina." Rajoy's government has warned Argentina it will suffer consequences for the expropriation, but the prime minister declined to say how Spain might respond. "I will not make any announcement or say anything now," he said during a one-day visit to Colombia to discuss economic cooperation with that South American nation. The impact on Latin America's energy sector remains unknown. Other companies in the region also have stakes in Repsol, and vice versa. Mexico's state-owned Petroleos Mexicanos, for example, has nearly 10 percent of the company, while Repsol in turn owns sizeable stakes in other gas, fertilizer and chemical companies operating in Argentina. The takeover prompted a flurry of meetings across Latin America as energy companies doing business in Argentina sought assurances. Executives of France's Total Austral gas subsidiary met with Argentine Planning Minister Julio de Vido in YPF's offices in Buenos Aires Thursday and promised to increase its natural gas production at sites co-owned by YPF by 2 million cubic meters a day - enough to grow Argentina's overall gas supply by 2 percent, de Vido announced. Petrobras President Maria das Gracas Foster also planned to sit down with de Vido on Friday, likewise promising increased production and demanding the reinstatement of a lease revoked by the province of Neuquen, which accused the Brazilian company of failing to develop the site. The same argument was used to justify Repsol's ouster.

Meanwhile, Spain's Foreign Minister Jose Manuel Garcia Margallo said he asked US Secretary of State Hillary Clinton for help in retaliating against Argentina, possibly at the World Bank, the International Monetary Fund, the G-20 nations and the Paris Club of financial officials from leading economies.

State Department spokesman Mark Toner said that "we're very concerned" about the nationalization move and urged Argentina again Thursday to "normalize its relationship with the international financial and investment community." But he didn't advertise what if any actions the US would take to support Spain. Interior Minister Florencio Randazzo told reporters in Buenos Aires Thursday that the government "makes decisions thinking about the Argentines and not about what the US or Spain may think." World Bank President Robert Zoellick called this attitude a mistake. "I think it is a symptom that we have to watch out for," he said, when countries under economic pressure "respond with populism, respond with protectionism. I think it is the wrong thing to do," Zoellick said. Argentine Economy Minister Hernan Lorenzino, appearing at the annual IMF and World Bank meetings that began Thursday in Washington, countered that both organizations have proven to be failures at rescuing economies.

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