Thursday, April 19, 2012

Spain, the US, China and Argentina's nationalization of YPF

Reuters reports on a claim that a state-owned Chinese oil company, Sinopec, was in negotiations with Repsol to buy the Argentine oil firm YPF, which Cristina Fernández has proposed to re-nationalized by having 51% of its shares - all to be bought from Repsol - controlled by the Argentine federal government and provinces (Charlie Zhu and Jim Bai, Argentine move to seize YPF spoils Sinopec deal 04/18/2012).

Argentina's move to nationalize local oil company YPF (YPFD.BA), controlled by Spain's Repsol (REP.MC), has spoiled years of planning by China's Sinopec Group to buy the South American company, sources said.

Bankers said China's second-largest oil company had held talks with Repsol to buy its controlling 57-percent stake in YPF. Chinese website cited a source as saying Sinopec had reached a non-binding agreement to take over YPF for more than $15 billion.

But plans by Argentine President Cristina Fernandez to seize control of YPF, which have incensed Spain and sparked international criticism, have killed any hopes that state-owned China Petrochemical Corp (Sinopec) could seal a deal, they said.
Releasing this information may be a ploy by Repsol to establish a claim for a higher price that what Argentina may eventually pay for its shares. That's how Axel Kicillof, Cristina's leading economic adviser and a key spokesperson for the nationalization proposal, treats it in this Spanish-language interview with TV Pública Argentina puts it in this interview with Recuperación de YPF: Entrevista a Axel Kicillof 18.04.2012:

The Cristina-friendly Página 12 ran this cartoon on 04/19/2012:

"Argentina says that its going to pay for Repsol what it's really worth." - "Ugh, so little?"
The US State Department officially grumps about the nationalization proposal (U.S. says Argentina's YPF plan "a negative development" 04/18/2012):

State Department spokesman Mark Toner said the United States was very concerned about Argentina's bid to seize the company, controlled by Spanish energy group Repsol, and had raised its concerns with the highest levels of the Argentine government.

"Frankly, the more we look at this we view it as a negative development," Toner told a news briefing.

"These kinds of actions against foreign investors can ultimately have an adverse effect on the Argentine economy and could further dampen the investment climate in Argentina."
But if the US can live with nationalized oil companies in Saudi Arabia, China, Mexico and Venezuela, to name only a few, it can live with an YFP majority-owned by public institutions in Argentina.

Spain's conservative government is fuming over the proposal. But their options are fairly limited, as Fiona Ortiz reports in Spain has few ways to pressure Argentina over YPF 04/18/2012. I'll be curious to see what if anything the Spanish government may have to say about Repsol's alleged negotiations with Chinese government-owned Sinopec to sell YPF.

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