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Spain Warns Argentina Over Oil Company Nationalization

4/18/2012 1:31 AM ET

Spain has warned Argentina over its decision to seize controlling stakes in the nation's largest oil company, YPF, from Spanish firm Repsol, and pledged to initiate a slew of swift retaliatory measures against the South American nation.

"Argentina has shot itself in the foot in a serious way. What worries me is that this means a cut, or at least distrust, in relations that have been really fraternal for a very long time," Spanish Foreign Minister Jose Manuel Garcia-Margallo said on Tuesday.

In an interview with RNE state radio, Margallo pledged swift retaliation to the Argentine decision. Without disclosing further details, he said: "The consequences will be in the areas of diplomacy, trade, industry and energy."

Meanwhile, Spanish Prime Minister Mariano Rajoy said in Mexico that Argentina's move to expropriate Repsol's shares in YPF was "without any justification," and added: "I must express my profound unease. It's a negative decision for everyone."

Separately, EU Foreign Policy Chief Catherine Ashton said the Argentine decision had sent a "very negative signal" to investors by creating "legal insecurity for all European Union and foreign firms in the country." She added that the EU was considering "all possible options" to counter the Argentine move.

Further, British Foreign Secretary William Hague warned that the move to expropriate Repsol's shares in YPF goes against all the commitments Argentina has made in "the G20 to promote transparency and reduce protectionism." He added that Britain would "work with Spain and our EU partners to ensure the Argentine authorities uphold their international commitments and obligations."

European Commission President Jose Barroso also expressed "serious" disappointment on the Argentine decision, and said: "We expect the Argentine authorities to uphold their international commitments and obligations, in particular those resulting from a bilateral agreement on investments with Spain."

Also, Repsol Chairman Antonio Brufau accused the Argentine government of resorting to nationalization "as a way of hiding the economic and social crisis which Argentina is suffering," and noted that crisis was partly due to "a mistaken energy policy."

Complaining of a campaign of "harassment" by the Argentine government in recent weeks to push down the prices of YPF shares in order to get a better bargain for the purchase of Repsol's shares in the oil company, Brufau said his company would pursue all legal means to ensure that it gets a fair price for its shares.

The developments came a day after Argentine President Cristina Fernandez de Kirchner announced her government's plans to seize controlling stakes in YPF from Repsol, and said a bill would soon be sent to the country's Congress seeking authorization for expropriating 51 percent of YPF shares. Currently, Respol, which has been controlling YPF since 1999, has a 57.43 percent stake in the oil company.

Describing energy as a "vital resource" for any State, Fernandez said the move was aimed at "recovering our national resources." She also blamed the doubling of the country's oil imports last year on the failure of companies like Respol to make adequate investments in oil and gas production.

She dismissed threats of reprisals, saying: This president isn't going to respond to any threats... because I represent the Argentine people. I'm the head of state, not a thug."

YPF is the latest addition to the list of industries nationalized by the Argentine government in recent years, following the nationalization of private pension funds worth some $24 billion, Aerolineas Argentinas SA as well as the country's postal service, railways and water works.

by RTT Staff Writer

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