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25th May 2019

EU gets behind Spain on Argentina oil grab

  • Repsol-sponsored biker. The FT reports the Spanish firm was trying to sell its subsidiary to China (Photo: ImageNationPhotography)

The European Commission has sharply criticised Argentina's plan to nationalise Spanish energy firm Repsol YPF, with EU foreign ministers to discuss the issue next week.

"I am seriously disappointed about yesterday’s announcement. We expect Argentina’s authorities to uphold their international commitments and obligations in particular with those resulting in bilateral agreements on protection of investments with Spain," EU commission President Barroso told reporters on Tuesday(17 April) in Brussels.

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Argentine President Cristina Fernandez de Kirchner on Monday announced the takeover of the Spanish-owned firm, one of the largest in South America.

With a 57 percent stake, Repsol is the majority shareholder in YPF, which they value at some €7.9 billion. Fernandez is sending a bill to congress to finalise the act which would leave Repsol with a 6 percent share in the company.

The EU commission said Argentina's decision to take control of the company without adequate and fair compensation is illegal. The executive, along with the Spanish authorities, warned action would be taken in the next few days.

For her part, EU foreign policy chief Catherine Ashton said: "The measure creates legal uncertainty for all EU and foreign firms in the country. The Spanish government has our full backing in this matter."

EU foreign ministers are to discuss the issue on Monday. An EU-Argentine joint committee meeting has been postponed in the meantime.

"These actions will not remain unpunished," Repsol executive chairman Antonio Brufau warned. He added that: "[Fernandez] carried out an unlawful act and made unlawful charges after a campaign aimed at knocking down YPF shares and allowing expropriation at a bargain price."

According to the company, the YPF takeover will not affect Repsol's business outside Argentina. Repsol posted a €2.193 billion net income in 2011, 53.3 percent lower than that recorded in 2010 while YPF posted €1.352 billion income, a 16.8 percent drop from the previous year.

YPF shares in the company have plummeted following Monday's announcement.

In an insight into what is going on behind the scenes, The Financial Times reports that Repsol had secretly tried to sell the Argentinian branch to a Chinese buyer. The paper also claims Repsol had not informed Buenos Aires of the Chinese buy-out negotiations.

Meanwhile, the UK - a historical antagonist of Argentina - has also hit out against Buenos Aires.

UK foreign minister William Hague said the takeover is part of a wider protectionist agenda. "This goes against all the commitments Argentina has made in the G20 to promote transparency and reduce protectionism," he noted.

In an echo of the 1980s Falklands War, Argentina refused in March to let two British cruise ships dock at the port of Ushuaia in protest at military manouevres around the Falklands islands. In early April, Buenos Aires also warned British and American banks advising UK companies exploring for oil around the islands that the activity is "unlawful."

A vast amount of oil, worth some €140 billion, is believed to lie under the disputed mairitime territory.

"After oil was discovered off the Falklands, she [Fernandez] suddenly revived the Argentine claim," British conservative MEP Charles Tannock said.

The loss of Repsel's Argentinian assets will not affect the Spanish economy, says Joachim Voth, a research professor at the Economics Department, Universitat Pompeu Fabra, Barcelona.

"Repsol's stake is part of Spanish assets abroad. The value of these is going down, as a result of the Argentina seizing part of the company, is not good news. But it has no direct impact on business conditions in Spain itself," he told EUobserver.

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