Despite international criticism and threats of economic retaliation, the Argentinian government has pressed on with its nationalisation of YPF, leaving the former owner Repsol with just a 6% share. The government however, does not plan to stop there, having announced that it would also take over YPF Gas, a butane and propane distributor, which is also owned by Repsol.
The Argentinian government’s reasoning behind the takeover was that YPF had not done enough to boost production, resulting in Argentina having to import increasingly large amounts of oil: the oil import cost for 2011 was US$ 9.4 billion.
The ministers placed in charge of YPF’s operations have already unveiled schemes designed to boost production by approximately 2 million bbls/y, via increased drilling and maintenance. 14 additional rigs would be utilised for the operations. The scheme is expected to result in the drilling of 130 new wells, and 400 repairs by December this year.
Despite making threats of economic action in retaliation for the seizures, it appears that Spain has little it can do to combat the situation.
Jose Ignacio Torreblanca, of the European Council on Foreign Relations said that, “The threat really has very little credibility. What measures can they take?” The investment relationship between the two countries appears to be rather one-sided, with Argentina having relatively little involvement in the Spanish economy and Spanish firms operating in the Argentinian telecoms industry being highly vulnerable to a worsening of relations.
It appears that lodging a complaint with the WTO would not have much of an effect either (Spain would have to win a case there to be able to restrict Argentinian imports legally), according to one source “Unfortunately, there’s no real WTO angle to this. This is a matter of investment and expropriation which is dealt with by the bilateral treaty.”
Despite being popular moves in domestic Argentine politics, the Argentinian government’s spate of expropriations has been cited by many analysts as a step in the wrong direction for all concerned, as investors are likely to be scared away from operating in the region.
Edited from various sources by David Bizley
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