In a bold move to gain control of Argentina’s energy reserves, Argentine President Cristina Fernandez pushed forward a bill to renationalize the country’s largest oil company on Monday, despite fierce criticism from abroad and the risk of a major rift with Spain.
In a national address, Fernandez said the legislation put to the Argentine Congress would give Argentina a majority stake in oil and gas company YPF, by taking control of 51 percent of its shares currently held by Spain’s Repsol.
Both Repsol and Spain strongly oppose the move and have warned that it could turn Argentina into an international pariah.
YPF is vital for Argentina’s energy future, especially after its recent find of huge unconventional oil and natural gas reserves. However, the company is under pressure from Fernandez’s government to raise output, while its shares have plunged in recent months on fears of possible state intervention. Argentina this year expects to import more than US$10 billion worth of gas and natural liquid gas to address an energy crisis even though it is an oil-producing nation, according to estimates from the hydrocarbon sector.
“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.”
Critics blame the government for an energy shortage and high gasoline prices. However, Fernandez said the shortage is the result of Repsol’s “emptying” of YPF and that Argentina had a deficit of US$3 billion last year, partly because of energy imports.
Argentines gathered in Buenos Aires’ main square shouting slogans, waving national flags and carrying banners supporting the government takeover. One of them read: “Today, with Cristina, we recovered YPF.”
YPF was privatized in the 1990s. Repsol’s subsidiary in Argentina holds 57 percent of YPF’s shares.
Fernandez said the renationalization was a long-held desire of her late husband and predecessor, former Argentine president Nestor Kirchner.
“I hope he’s watching over me because he always wanted to recover YPF for the country,” she said.
However, analysts said the planned takeover 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.”
In Madrid, Spanish Minister of Foreign Affairs Jose Manuel Garcia-Margallo called the move arbitrary, and said it broke the climate of cordiality and friendship that had existed with Argentina. He said Spain would respond with “forceful measures” he did not describe.
The European Commission has warned that nationalizing YPF would be bad for the investment climate in Argentina and has said it backs Spain in the standoff over the subsidiary.
Fernandez, however, was unmoved by the risk of a row with Spain, Argentina’s largest foreign investor.
“This president is not going to answer any threat, is not going to respond to any sharp remark,” she said to applause from business, union and political leaders.
“I am a head of state and not a hoodlum,” said Fernandez, who has also renationalized the country’s Aerolineas Argentinas airline and nationalized the Anses state private pension funds.