When Argentine President Cristina Fernández de Kirchner abruptly left the Summit of the Americas, it was reported that she did so over the lack of support for her country's claim to the British-controlled Falkland Islands.
Yesterday, President Kirchner revealed another reason she returned to Buenos Aires: to announce the nationalization of the Argentine oil company, YPF, whose majority stakeholder is the Spanish energy firm, Repsol. The move has infuriated Repsol and Spanish officials, and raised concerns that this may be the first of many expropriations of privately run companies in Argentina, putting the government on the path toward a Hugo Chávez-type model of state control over key resources.
“Once you start expropriating you don’t know where it will stop,” says Boris Segura, an analyst at the New York investment bank Nomura. “Mrs. Kirchner is now running close to Mr. Chávez’s model,” Segura says.
During a passionate speech at the presidential palace yesterday afternoon, Kirchner announced that her government will seize 51 percent of Repsol’s shares in YPF. Spanish industry minister José Manuel Soria immediately declared the move “hostile,” and said measures would be taken in the next few days against Argentina.
YPF, which stands for Fiscal Petroleum Fields in English, was privatized in 1993 by former president Carlos Menem, and purchased by Repsol in 1999. Kirchner said she sent a bill to Congress – almost certain to pass in both houses – that will permit her government to expropriate YPF.
“We are the only country in [the Americas], and nearly the world, that doesn’t control its own natural resources,” Kirchner said in front of a mural of Eva Perón, the second wife of former president Juan Perón, who oversaw the mass nationalization of Argentine industry and public services in the late 1940s. “This is the recuperation of the sovereignty of Argentina’s natural resources,” she said.
Kirchner’s nationalistic rhetoric was explicit in her address yesterday, and it has played an integral part in the Argentine dispute with the UK over the Falkland Islands the past few months. Her call for the nationalization of resources sparked celebrations by pro-Kirchner groups in the Plaza de Mayo, the main square in Buenos Aires.
“This is left-wing nationalism,” says Nelson Cardozo, a lecturer in political science at the University of Buenos Aires. “YPF is an extremely symbolic company. By expropriating it, Mrs. Kirchner is seeking to deflect from domestic economic problems and gain favor across the social classes,” says Mr. Cardozo.
President Kirchner criticized Repsol’s management of YPF, saying the company has failed to invest in Argentina and deriding the fact that her country imports energy – $9.4 billion last year – when its vast Vaca Muerta shale gas and oil reserves mean only the US and China have more recoverable resources. “Repsol’s curve of disinvestment looks like an elephant’s trunk,” Kirchner said.
Kirchner insists she is seeking energy self-sufficiency, but Mr. Segura, the analyst at Nomura, says the nationalization is the result of failed domestic policies which set energy prices below international levels. Kirchner is now seeking to increase her cash-strapped government’s revenue streams.
Nationalization goes “one step beyond protectionism,” says Segura. He says this move takes Argentina into the territory of Hugo Chavez’s left-wing revolution in Venezuela, where Mr. Chavez is well known for expropriating huge swathes of industry.
Wall Street suspended trading of YPF shares as they dropped 11 percent following yesterday’s announcement, but value has fallen substantially since January as investors grew concerned about southern provinces revoking YPF’s oil leases, and rumors spread that Kirchner would expropriate.
Repsol has a 57.43 percent stake in YPF, and spokesmen in Madrid say the expropriation is “discriminatory” since only Repsol’s shares will be affected. Some 17 percent of YPF is traded on the markets and 26 percent belongs to the Eskenazi family in Argentina, which bought into the company in 2007 and, until yesterday, was responsible for its day-to-day management.
YPF’s directors were forced to leave their Buenos Aires offices yesterday as Julio De Vido, the Argentine planning minister, and Axel Kiciloff, the deputy economy minister, moved in via an emergency decree to take control. According to Mr. Cardozo, Mr. Kiciloff forms part of a small group of politicians from La Cámpora, a militant Kirchnerist movement that has gained increasing influence over the president’s decisions.
“Kiciloff is the one who has drafted and pushed this bill,” Mr. Cardozo says.
Members of La Cámpora occupied the front row during Kirchner’s speech and led chants, the type normally heard at soccer matches, in support of the president. Despite the euphoria in her party, questions have been raised about where the Kirchner government will find the capital to increase YPF’s production.
“With my heart I applaud the fact that YPF will fly the Argentine flag,” Alieto Guadagni, a former energy secretary, said in a television interview. “But with my head I wonder where the money to invest will come from.”