Spain warns Argentina over Repsol takeover

17th April 2012, Comments 0 comments

Spain warned Tuesday that Argentina's takeover of oil giant Repsol's YPF subsidiary broke a "good understanding" between the two as Repsol demanded at least $10 billion in compensation.

The government backed the company, angrily pledging to take a range of measures against Argentina after its president, Cristina Kirchner, announced she would nationalise the firm in defiance of Madrid's demands.

The European Union, too, warned Buenos Aires that it was sending the wrong signal to investors who dumped Repsol shares, sending them 6.06 percent lower.

"These acts will not remain unpunished," promised Repsol executive chairman Antonio Brufau after Argentina's decision to take 51 percent of YPF, virtually wiping out Repsol's a 57.4 percent holding.

Repsol would seek an amount at least equal to the value of its stake in YPF, which the firm estimates at $10.5 billion, the Repsol chief said.

"Repsol will launch all legal actions that are within its reach," Brufau vowed, saying he had a wide range of options including constitutional, commercial and civil actions.

Spain's government summoned Argentina's ambassador, Carlos Bettini, for the second time in five days to ask why Buenos Aires had ignored warnings against intervening in the Repsol subsidiary.

"Argentina has shot itself in the foot in a serious way," Foreign Minister Jose Manuel Garcia-Margallo told reporters.

"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," he said.

Speaking in Mexico, Spanish Prime Minister Mariano Rajoy said the "decision breaks the previous good understanding between the two countries."

It was a "negative decision ... without justification," he told the World Economic Forum on Latin America.

On Monday, Mexico's President Felipe Calderon offered strong support, saying: "It seems very regrettable to me that the government of Argentina, our friend ... has taken a measure that will do no good to anyone.

"All developing nations need investment and no one with their wits about them invests in a country that expropriates investments," Calderon said, adding: "Argentina can rectify this measure."

Mexican state oil company Pemex has a 9.5 percent stake in Repsol.

Meanwhile, European Union foreign affairs chief Catherine Ashton said Argentina's move sent a "very negative signal" to global investors and was a cause of grave concern.

Repsol denied Argentine accusations that it had failed to invest enough in YPF, saying that it had poured $20 billion into YPF in addition to $15 billion it paid to buy the subsidiary in 1999.

The Repsol boss accused Kirchner of taking the decision "as a way of hiding the economic and social crisis which Argentina is suffering."

Brufau blamed that crisis in part on "a mistaken energy policy".

Argentina had run a campaign of "harassment" over the past weeks so as to make the group's shares fall and ease the expropriation at a bargain price, the Repsol chairman charged.

"It is not appropriate for a modern country, Argentina does not deserve this," he said of the takeover, which Repsol has described as "manifestly illegal and gravely discriminatory".

Brufau said YPF accounted for 25.6 percent of the group's operating profit, 21 percent of its net profit and 33.7 percent of its investments, adding that: "These are big figures but we can withstand them."

Front page headlines in Spain lambasted the Argentine takeover, many of them splashing a photograph of Kirchner announcing her decision with a picture of Evita Peron, the populist first lady of Argentina in the 1940s and 50s, in the background.

"Pillaging," headlined an editorial by the leading daily El Pais.

"The expropriation of 51 percent of YPF opens a conflict that will have grave consequences for Argentina," it said.

"It is not hard to predict that a YPF run by the group that governs Argentina will lose any possibility of making profits," the newspaper said, arguing that it would end up squandering the country's natural resources.

© 2012 AFP

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