Nationalizing YPF in Argentina

Aljazeera English's Counting the Cost just over a year ago did a program whose first part is devoted to the nationalization of Argentine oil company YPF, Argentina's president vs capitalism 04/21/2012, which takes a skeptical view of the action:

They have an accompanying article, Argentina's president vs capitalism 04/27/2013. Nationalizing YPF certainly meant the state taking more control and responsibility and prioritizing Argentina's interest in developing their oil and natural gas reserves over the profit maximization of that single company, which had previously been the subsidiary of a Spanish firm, Repsol. As the article reports:

Argentina accuses Repsol of driving down production at YPF and taking 90 per cent of the company's profits.

But could this drama have a lot more to do with Fernandez falling out with Argentina's billionaire Eskenazi family? Through the family's Peterson Group it owns 25 per cent of YPF.

Nestor Kirchner, Fernandez's late husband, helped the Eskenazis buy the stake - although it was Repsol that loaned the money.

YPF is now state-owned but is not run as though it were a government agency. It remains a separate business that will need to generate a profit. Calling it "state capitalism" would be more meaningful that saying it was "vs. capitalism." State ownership of the leading oil firms of major oil-producing countries is common among a variety of governments, including China, Mexico, Norway, Russia, Saudi Arabia and Venezuela. I wrote a series of posts last year about a series of articles in The Economist on state capitalism, including one on state-owned oil companies.

Tags: argentina, state capitalism, ypf

Argentine Congress approves nationalization of 51% of YPF oil company

The Argentine Chambers of Deputies (lower house) on Thursday followed the Senate in approving the compensated nationalization of 51% of the shares of YPF (Yacimientos Petrolíferos Fiscales), the formerly state-owned Argentine oil company, from the Spanish multinational Repsol, which owned 57% of the shares. (Hoy se aprueba la expropiación de YPF Página 12 03.05.2012) President Cristina Fernández' government justified the measure as necessary to protect Argentina's sovereignty by regaining control of its own energy supplies and production.

Other investors will still own 49% of the company, including Repsol's remaining 6% holding if they choose to retain it. This is being rightly called a nationalization. But that doesn't mean that YPF will be completely state-owned again. This will be a public-private partnership (PPP). The PPP concept was popular in previous decades among the advocates of neoliberal economics and the privatization of state-owned companies that was a central principle of it. PPP's were an intermediate state to full privatization in their eyes.

The PPP arrangement for YPF is moving back in the other direction. Ironically, one foreign firm that objected to the move by Argentina was Pemex, the state-owned Mexican oil company, which holds shares in YPF. Only shares held by Repsol are being taken in this action.

Paul Krugman in Down Argentina Way 05/03/2012 grumbles about how sloppy the business press is in its coverage of Argentina:

Matt Yglesias, who just spent time in Argentina, writes about the lessons of that country’s recovery following its exit from the one-peso-one-dollar “convertibility law”. As he says, it’s a remarkable success story, one that arguably holds lessons for the euro zone.

I’d just add something else: press coverage of Argentina is another one of those examples of how conventional wisdom can apparently make it impossible to get basic facts right. We keep getting stories about Ireland’s recovery when there is, in fact, no recovery — but there should be, darn it, because they’ve done the “right” thing, so that’s what we’ll report.

And conversely, articles about Argentina are almost always very negative in tone — they’re irresponsible, they’re renationalizing some industries, they talk populist, so they must be going very badly.

He also includes a chart showing that Argentina's growth since it extracted itself from a euro-type currency and financial crisis in 2001-2 compares very favorably with that of Brazil, which is recognized worldwide as one of the BRIC countries (Brazil, Russia, India, China) of surging growth and notably increasing world clout.

This is a Spanish-language video of the President talking about the YPF takeover on Thursday, Visión Siete: Cristina: "Estamos muy contentos por la recuperación de YPF" 05/03/2012, in the context of Argentina's growth and her ambitions for the country:



Tags: argentina, cristina fernández, paul krugman, ypf

Business press struggles with the YPF story

I'm fascinated to see how the business press is reacting to Argentine President Cristina Fernández' proposal to take control of 51% of the YPF oil company, which is currently controlled by the Spanish-based multinational Repsol. Argentina is one of the countries that has serious - and so far successfully - challenged the neoliberal/Washington Consensus economic policy prescriptions over the last decade. How the business press responds to actions like the YPF nationalization says a lot about the ideological outlook they take.

Roben Farzad in Argentina Tries the Chávez Way Bloomberg Businessweek 04/17/2012 takes a more frivolous approach:

It's hard to believe now, but in the early 1980s, Argentina was perhaps the most promising and talked-about emerging market. Coming off the trauma of its Dirty War and military dictatorship, and its disastrous invasion of the Falkland Islands, democracy finally took root in 1983. Endowed with abundant natural resources, endless tracts of fertile land, and half-decent infrastructure, the then-167-year-old country projected upside to the investor community.

But Argentina regressed. In late 2001, as its economy collapsed, the country defaulted on $100 billion in debt and nationalized several enterprises. Argentina has since been a pariah state among international creditors. At the World Bank’s International Centre for Settlement of Investment Disputes, Argentina has more disputes pending against it than any other nation. Since 2003, rulers Néstor Kirchner and wife Cristina Fernández de Kirchner have nationalized $24 billion in private pensions and raided $6.6 billion in reserves from the central bank to make debt payments.

Now, Cristina Fernández (a widow since October 2010 and reelected by a landslide a year later) is seizing control of YPF, the former national oil monopoly that since 1999 has been majority-owned by Spain’s Repsol (REP). On Monday, she delivered a fire-and-brimstone speech on TV that blamed foreigners for the energy shortages plaguing the country—a rationalization for what would be the largest natural resource re-nationalization since Russia moved to seize Yukos in 2003. Fernández decreed that Argentina’s minister of planning and public investment would immediately assume the reins at YPF.

I have the irresistible urge to unpack this particular pile of hoo-hoo piece of reporting. So I will:

It's hard to believe now, but in the early 1980s, Argentina was perhaps the most promising and talked-about emerging market.

That would have been under the leadership of President Carlos Menem, also still a member of Cristina's Partido Justicialista (PJ), the Peronist party. Menem was committed to neoliberal fundamentalism. His government privatized state functions like crazy and deregulated according the dictates of what became known as the Washington Consensus endorsed by the International Monetary Fund (IMF) and the World Bank. A man whose economic policies Angela Merkel would surely love. Those measures, along with Argentina's euro-like tying of their currency to the US dollar, crashed their economy spectacularly in 2001. Deregulation of the capital markets made Argentina particularly vulnerable to attacks by international financial speculators.

Coming off the trauma of its Dirty War and military dictatorship, and its disastrous invasion of the Falkland Islands, democracy finally took root in 1983. Endowed with abundant natural resources, endless tracts of fertile land, and half-decent infrastructure, the then-167-year-old country projected upside to the investor community.

Democracy first "took root" in Argentina in the early 1800s, but it would be fair to say that the roots were relatively weak ones. The country was plagued by a long series of military takeovers. But all of them were mild in comparison to the brutal military dictatorship of 1976-83, the worst Argentina and South America has ever experienced. It was that dictatorship that began the push for Argentina to adopt the aggressive neoliberal economic policies demanded by the IMF and the World Bank. Or, to use Farzad's phrase, the military dictatorship "projected upside to the investor community".

But Argentina regressed. In late 2001, as its economy collapsed, the country defaulted on $100 billion in debt and nationalized several enterprises.

They "regressed" because the neoliberal/Free Market/Washington Consensus policies insisted on by the US, the IMF and the World Bank failed miserably - for the people and national economy of Argentina. It worked well for financial speculators and for companies like Repsol that got to buy a majority in YPF and milk it as a cash cow for the benefit of their investments outside of Argentina.

In late 2001, as its economy collapsed, the country defaulted on $100 billion in debt and nationalized several enterprises. Argentina has since been a pariah state among international creditors. At the World Bank’s International Centre for Settlement of Investment Disputes, Argentina has more disputes pending against it than any other nation. Since 2003, rulers Néstor Kirchner and wife Cristina Fernández de Kirchner have nationalized $24 billion in private pensions and raided $6.6 billion in reserves from the central bank to make debt payments.

Or, to put it more briefly, Argentina stopped playing the neoliberal game after it had wrecked their economy. And they've been recovering nicely ever since. Countries like Greece, Spain, Portugal, Ireland and Italy are suffering from a similar disaster today that Argentina suffered in 2001. But they are following Angela Merkel's neoliberal prescriptions and it's wrecking their economies even more badly. The sooner they learn from Argentina's lessons, the better. They will no doubt be criticized by Bloomberg Businessweek when they do. But their people and their national economies will have a chance to improve that they won't get under Angienomics.

Now, Cristina Fernández (a widow since October 2010 and reelected by a landslide a year later) is seizing control of YPF, the former national oil monopoly that since 1999 has been majority-owned by Spain’s Repsol (REP). On Monday, she delivered a fire-and-brimstone speech on TV that blamed foreigners for the energy shortages plaguing the country—a rationalization for what would be the largest natural resource re-nationalization since Russia moved to seize Yukos in 2003. Fernández decreed that Argentina’s minister of planning and public investment would immediately assume the reins at YPF.

Nationalization is always a sin for the American business press. A "fire-and-brimstone" type sin, we might say.

They could have also used other examples of partially or fully state-owned oil companies, from Saudi Arabia, China, Venezuela, Mexico, Brazil and others. As The Economist reported in some detail earlier this year, the 13 largest oil companies in the world fall into that category. But since neoliberalism says that nationalized oil firms are inefficient, that must mean the world oil business is in a shambles, right?

Or, not. What it means is that Argentina has rejoined the list of countries that consider oil and gas production such a critical national resources that they choose not to leave it to the whims of the Great God Free Market. One leader who expressed such a sentiment in 2008 was Mariano Rajoy, currently the conservative Prime Minister of Spain, who said, "Nuestro petróleo, nuestro gas y nuestra energía no se pueden poner en manos de una empresa rusa, porque eso nos convertiría en un país de quinta división." ("Our oil, our gas and ourenergy can't pass into the hands of a Russian firm, because that would convert us into a fifth-rate country.") His concern then was that the Russian oil company Lukoil might buy shares in Repsol. Now, Rajoy is loyally defending Repsol against Cristina's nationalization proposal while wrecking his own country's economy with the austerity economics demanded by Princess Angela von Merkel. (Hace cuatro años, Rajoy se oponía a la extranjerización de los hidrocarburos en España Télan 19.04.2012; Medios argentinos airean vídeos de Rajoy rechazando la entrada de Lukoil en Repsol El País 20.04.2012) Here's Rajoy back then holding forth on the need for sovereignty in energy matters (in Spanish), Rajoy exige que se impida la entrada de Lukoil en Repsol Libertad Digital Televisión 22.11.2008:



Farzad does get around to some relevant information about the case of Argentina and YPF: "In 2011, for the first time since YPF was privatized in the early 1990s, Argentina became a net importer of natural gas and oil. The government there blames Repsol for starving YPF of investment in order to pay out shareholder dividends."

Then he takes another shot at Cristina: "This month, on the 30th anniversary of the war over the islands Argentina persists in calling Las Malvinas, she has been thumbing her nose at London." Actually, Argentina generally has persisted in calling the island the Malvinas since, you know, Britain occupied them illegally in 1833. But Farzad treats it as an arrogant quirk of the current President.

Xavier Vidal-Folch offers refutations of the Argentine government's charges about the business inadequacies of YSP under Repsol's ownership in Repsol ¿fiera predadora? El País 19.04.2012. But at best it's a sloppy analysis, in which he doesn't make at all clear the sources of his counter-claims. And the arguments are fairly slippery. He makes the point that only 50 of YPF's employees are Spaniards, but so what? I haven't noticed Cristina's government arguing that too many of YPF's employees were Spanish. He also claims that Repsol is the largest investor in Argentina, but based on what? The market value of the shares they bought in YPF? The point of the Argentine government's criticism of Repsol-YPF is that they haven't invested sufficiently in exploration and development. Vidal-Folch addresses that arguments, but also in a very unclear way. He also seems to basically think the issue of dividend payouts is an irrelevant issue to anything else, that it stands alone separate from any question of what the company is delivering to Argentina in terms of development and exploration.

Ben Sills and David Voreacos report for Bloomberg on the agreement between Repsol and YPF's second-largest owners, the Petersen Group, which is controlled by Argentina's Eskenazi family: Repsol Required to Buy Eskenazi YPF Stake 04/20/2012. There is likely to be a legal fight over Repsol's commitments to the Petersen Group.

Like several reports I've seen, Sills and Voreacos make a particular point that the Eskenazi family's investment in YPF was backed by former President Néstor Kirchner, Cristina's late husband:

The Eskenazis made their fortune in banking and construction, buying 15 percent of YPF from Repsol in 2008 in a deal backed by then-president Nestor Kirchner, the late husband of Fernandez. The acquisition was financed with a syndicated bank loan and a seller’s note from Repsol. The Eskenazis bought an additional 10 percent of YPF in 2011 with two similar loans.

Tags: argentina, axel kicillof, cristina fernández, mariano rajoy, spain, ypf

The YPF nationalization and Argentina

Marcelo Justo reports on Repsol's claim that the Chinese state-owned oil company Sinopec had offered to buy Reposol's 57% stake in YPF for $15 billion in Operación china Página 12 19.04.2012. Miles Johnson and Jude Webber reported on the claim in Argentina swoop scuppers China oil deal Financial Times 04/17/2012.

Basically, there are good reasons to doubt the claim. Yes, it's shocking, just shocking to think that respectable oil companies like Repsol or Sinopec might just lie about such a thing in hopes of squeezing more compensation out of the Argentine government than they might otherwise get. But it could be possible!

One issue is that Sinopec bought 40% of Repsol's operations in Brazil in 2010 for $7 billion. So there could be some mutual back-scratching going on between the Sinopec and Repsol business partners in making a claim. With investments already in the region, why would they make a lucrative offer to buy Repsol's stake in Argentina? Especially when YPF has been under intense criticism from Cristina Fernández' government for failing to making decent exploration and operational investments in Argentina. Justo's article suggests that Sinopec has been maneuvering in some way to cut a deal with the Argentine government to gain access to shale gas reserves recently discovered (not by YPF) known as the Vaca Muerta formation.

Spain is trying to rally international criticism against the proposed nationalization of YPF. Victor Mallet writes that Argentina strikes at bad time for Rajoy Financial Times 04/17/2012:

The seizure of what was once the largest investment abroad by a Spanish company could hardly have come at a worse time for Mariano Rajoy, Spain's current prime minister and successor to Mr [José María] Aznar as leader of the centre-right Popular party.

Politicians and business leaders accuse Ms Fernández of kicking Spain while it is down. She is taking advantage, they say, of a Spanish economic recession and a eurozone sovereign debt crisis so grave that some analysts predict Madrid will follow Athens, Dublin and Lisbon in seeking an international financial bailout.

Worse, almost the only bright patch for the Spanish economy over the past four years of crisis has been the performance of its investments in emerging markets - especially Latin America.

Although it's not clear to me what role the multinational Repsol actually plays in the Spanish national economy. When they lose most of their stake in YPF, YPF will no longer be available to Repsol as the kind of cash cow it is now. But if the official Argentine claims are correct, Repsol has been mostly investing those profits in other countries outside of Spain and Argentina, like Libya. So Mariano Rajoy's conservative government, whose first priority is to cater to the Spanish One Percent while following Germany's orders on austerity economics, is obviously upset that Repsol is being inconvenienced. But how much it may hurt their national economy, if at all, is not clear.

The Financial Times has been doing some sloppy reporting on the YPF takeover. For instance, Jude Webber in Argentine deputy economy minister holds sway 04/17/2012 uncritically echoes the charges against Cristina's economic advisor Axel Kicillof made in the frivolous and barely-disguised anti-Semitic column by Carlos Pagni in the dogmatically anti-Peronist, anti-Cristina paper La Nación I discussed previously. Webber at least omits the more obvious anti-Semitic inuendo and does not credit Pagni directly. He follows it up on 04/18/2012 with another hit piece of the same tone, Baby-faced Marxist's rhetoric is music to the ear of the president (link is to Newsbank Access World News version).

A less sleazy but apparently purely speculative take on it comes from John Paul Rathbone, Fernández takes her revenge Financial Times 04/17/2012.

But another line of reasoning leads to Argentine domestic politics and cronyism. Indeed, YPF may not be a Venezuelan-style nationalisation, as many have compared it to. Instead it may be closer to the kinds of power battles that Russia is known for. Argentina has oligarchs too and Repsol, much like western oil groups in Russia, may have got caught in the crossfire of an internal battle.

The Argentine oligarchs here are the Eskenazi family. Four years ago, they were encouraged to take a 26 per cent stake in YPF by former president Néstor Kirchner, Ms Fernández's late husband. The Eskenazis did this via their Melbourne-incorporated Petersen Group. The $3.5bn deal was a highly leveraged transaction, with the debt entirely financed by YPF's unusually high dividend payout - an arrangement that necessarily had Mr Kirchner's blessing.

Rathbone, however, does not offer any reason Cristina might have had to do anything against the Eskenazi family. Instead, he resorts to FOX-style "some say ..." speculation: "How and why is the subject of much speculation. Some say the Eskenazis may have reneged on whatever arrangement they had with Mr Kirchner after the former president's death."

And, oh, by the way, the Petersen Group's shares in YSP are not being compulsorily bought out in the nationalization Cristina has proposed. Only shares held by Repsol are targeted, and Repsol could still retain a 6% stake after the buyout is finalized. At the end of his column after spinning his speculations, Rathbone does at least allude to what the democratically elected Argentine government actually says its reasons for the action are:

The extraordinary thing is that the roots of this controversy lie in YPF's dividend policy. It financed the Eskenazis' entry. It meant Repsol, as majority owner, "raped the country" by repatriating huge dividends, or so official rhetoric goes. And it caused YPF to scrimp supposedly on investment - ostensibly the reason for the nationalisation - even though Mr Kirchner endorsed the policy.

None of this criticism should be terribly surprising. Oil companies know they have to make skillful propaganda. (See BP, Gulf Oil Spill, 2010)

Miles Johnson in another FT article from the same day offers a different picture of the Eskenazi family's position in the YPF deal (Repsol reeling from Argentinian body blow):

Away from the issue of compensation, Repsol also faces losses on $1.9bn of loans made to the Petersen Group, controlled by the Argentine Ezkenazi family, which bought a 25.5 per cent stake of YPF from the Spanish company between 2008 and 2011.

The Ezkenazi family had been funding the loans with dividends from YPF, with the clauses of the loan agreements showing that if the Argentinian company's dividend payout ratio falls below 90 per cent of profit, then they can give the shares back, and the debt, to Repsol. A similar clause is activated if Repsol's control over YPF drops below 50.01 per cent, a situation now seemingly certain.

Fitch, the credit rating agency, had already cut Repsol's rating in March as speculation about nationalisation increased, noting the impact a loss of the subsidiary would have on the Spanish group's reserves and leverage, and the possible loss of the loans made to the Ezkenazi family. [my emphasis]

Cristian Carrillo looks at the Eskenazi family's YSP investment in El laberinto Eskenazi Página 12 19.04.2012

In yet another hostile piece in FT on 04/18/2012, Radical policies risk ending in tears (link is to Newsbank Access World News version),
Jude Webber quotes the Mayor of Buenos Aires, Mauricio Macri, criticizing the YPF takeover move. Macri is the highest profile opposition leader against Cristina right now. Macri heads the Propuesta Republicana (PRO) party, which is largely his personal electoral vehicle. Like the main opposition party, the Unión Cívica Radical (UCR), Macri initially opposed the YPF nationalization. The day after the announcement, he told a cheesy and strange story about getting up in the middle of the night and looking at his young daughter and thinking about the insecurity so many people in Argentina feel. Yes, the oil multinational Repsol is like a defenseless little girl. (?!?)

The more I hear about Macri, the more of a flake he comes off to me. By Thursday, he was saying that if he were elected President in 2015, he would keep YPF nationalized. (Las volteretas de Mauricio Página 12 19.04.2012) Go figure.

Carnegie Endowment associate Moisés Naím is described at the Carnegie website as having served as the Venezuelan "Minister of Trade and Industry in the early 1990s, director of Venezuela's Central Bank, and executive director of the World Bank". He also grumps in The Siren Call of Populism Seduces Again about the nationalization proposal:

Repsol "pursued a policy of pillage, not of production, not of exploration", the Argentine president thundered on Monday. "They practically made the country unviable with their business policies, not resource policies." Such was Cristina Fernández's sulphurous stance as she announced her government was renationalising YPF, the country’s largest oil group.

There are of course many convoluted reasons behind the Argentine government’s contentious decision to reverse the privatisation of a few years ago. But objective observers will agree that this was not part of an overarching development strategy, nor a manifestation of resource nationalism – nor indeed any other carefully crafted initiative forming part of a broader design. Rather, cronyism, rifts between rival oligarchs, political expediency, populism and the wish to please a public resentful of the privatisations of the 1990s all played into the decision. [my emphasis]

Those "objective observers" being, of course, safely conventional Very Serious People like Moisés Naím.

There will no doubt be more weeping and gnashing of teeth over the nationalization of YPF from the One Percenters and their loyal spokespeople.

And, gosh, I just head on the news that World Bank head Robert Zoellick thinks it's a bad idea! Who could have predicted?

Tags: argentina, axel kicillof, cristina fernández, spain, ypf

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 Caixin.com 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.

Tags: argentina, axel kicillof, cristina fernández, spain, ypf

Spain's conservative government - and the Socialist opposition! - loyally defend the Spanish One Percent in the YPF takeover

This is a mostly Spanish-language report from TV Pública Argentina about the object from the government of Spain to Argentine President Cristina Fernández' move to compel the sale of a 51% stake in the Argentine oil company YPF. The entire 51% will be taken from Repsol, a Spanish multinational who currently holds around 57% of the shares. None of the other investors will be required to sell their shares.

I have zero sympathy for conservative Spanish Prime Minister Mariano Rajoy in this. He's aggressively implementing Angela Merkel's austerity policies, damaging the lives and well-being of his own people but he leaps to the defense of the Spanish-based multinational Repsol in the controversy. The fact that the Spanish Socialist Party (PSOE) is supporting Repsol as well is almost too pitiful for words. Though it's not really surprising. I am surprised at the PSOE leader Alfredo Pérez Rubalcaba grovelling shamelessly to the president of Repsol, Antonio Brufau, who is also seen in the news report.

Rajoy: "Rompe el buen entendimiento en la relación entre ambos países" 04/17/2012:



EU Commission President José Manuel Barroso is seen in the report giving a statement in English defending Repsol's position. However, he uses the word "bilateral", which is a hopeful diplomatic sign from Argentina's point of view. The EU Commission would take a very limited role in a dispute they define as a bilateral dispute between Spain and Argentina.

Here is an English-language report from Euronews from a few days ago, before Cristina's formal proposal, Spain warns Argentina over energy nationalisation 04/13/2012:



Here are a couple of other important Argentine players in the current move to nationalize YPF. Julio De Vido, Minister of Planning and as of Monday acting head of YPF, and Axel Kicillof, Cristina's Vice-Minister of Economics and one of her closest advisers, who is acting as a leading advocate for the nationalization proposal.

La Nación is traditionally the paper of the Argentine "oligarchy", as the Peronists call them, the oligarchy being the traditional enemies of Peronism; in fact, their enmity to the Peronist Partido Justicialista (PJ) has been one of the defining characteristics of Peronist politics from the beginning to this day. Kicillof was the target of a hit piece in the paper last month by columnist Carlos Pagni: Axel Kicillof, el marxista que desplazó a Boudou 12.03.2012. It's really a pretty nasty piece. Kicillof does not describe himself as a Marxist, though it's pretty clear Pagni knows that. Kicillof was a professor of economics who, according to Pagni, approved of Nobel Prize winning economists Paul Krugman and Joe Stiglitz, and read some of Karl Marx' work in German. No doubt all very sinister signs for a economist who Pagni notes specialized in the history of economic theory. He throws in that his mother was a psychoanalyst and his great-grandfather was a famous rabbi in Odessa, Russia. (In other words, he's Jewww-wwwish!) What a sleazy piece. You would hope that even the oligarchy's paper wouldn't want to run trash like that. But apparently you would be wrong.

Gee, the Argentine One Percent and their spokespeople hate Cristina and her policies! Of course, we didn't need a sleazy column from this fool Carlos Pagni in La Nación to know that.

(Full disclosure: I also admire Stiglitz' and Krugman's work and I've also read some of Karl Marx in German. And I'll say to Carlos Pagni in German, lech mich doch. (You could translate it as "bite me" or "kiss my ***".)

Kicillof is also a bogeyman for Ezequiel Burgo in the anti-Cristina Clarín, Los secretos del gurú económico que logró hipnotizar a Cristina 15.04.2012. Despite the FOXist headline - "The Secrets of the Economics Guru Who Succeeded in Hypnotizing Cristina" - they only find him guilty of the economics-theory sin of specializing in the "heterodox" John Maynard Keynes. Yeah, he was "heterodox" in, oh, 1935. Even though macroeconomics has forgotten a lot of what he taught the profession that the current depression has shown to be extremely valid and durable. Maybe his psychoanalyst mama taught him hypnosis. But Cristina Fernández doesn't strike me as the type for fall under the spell of a Svengali. (Although there may be a nudge-nudge wink-wink sexual insinuation in the tone of the article.) They also noted his background as a "militant" in the Peronist youth organization La Cámpora, which for La Nación and presumably for many Clarín fans would be a negative thing. Though for a Peronist adviser in an activist left-leaning Peronist government, it's a plus. Burgo's article takes a critical, even unfriendly, attitude toward Kicillof. But he didn't seem to have found the kind of nonsense Pagni was slinging in La Nación.

Francisco Peregil also looks at Cristina's current circle of advisors, Kicillof included, in Fernández estrecha su círculo de poder El País 31.03.2012.

Tags: argentina, axel kicillof, cristina fernández, psoe, spain, ypf

More on Argentina's YPF takeover

Argentine President Cristina Fernández' proposal to have the Argentine federal government take a 51% stake in the YPF oil company has been big news in Argentina and Spain. Francisco Peregil reports for Spain's El País, which has been editorially critical of Argentine President Cristina Fernández' policies toward the oil company YPF on her proposal to re-nationalize the once state-owned company in Argentina announces expropriation of Repsol oil subsidiary YPF 16.04.2012:

In a speech made in Buenos Aires after returning from the Americas Summit in Colombia, Fernández de Kirchner explained that she will send a law to Congress that proposed giving 51 percent control of YPF to the federal government and the remaining 49 percent to the country’s provinces.

I haven't looked at the actual documents. But this is quite different from what Página 12 reports in El Gobierno Nacional propuso la expropiación del 51 por ciento de las acciones de Repsol en YPF y declarar de interés público el autoabastecimiento de combustibles 16.04.2012. Página 12 says that Cristina's proposal calls for government control of 51% of the YPF shares, with the federal government holding 26.01% of the total and the provinces 24.99%. This is the only report I've seen that claimed the proposal was for 100% nationalization. Bloomberg News has a silly headline for a report by Rodrigo Orihuela: Argentina Seizes 51% of Oil Producer YPF to Stem Imports 04/16/2012.

Continuing with the El País article:

In the coming days, the country’s appraisers will decide how much it will reimburse YPF for its shares.

"When one makes decisions in the interests of national management [...] one also expects that managers understand the interests of the state,” Fernández de Kirchner said.

"We are the only country in America and one of the few in the world that doesn’t manage its own natural resources, but there were stronger arguments in favor of us taking this decision," she said.

The nationalization came just days after Spain issued a stern warning against the Argentinean government not to take control of YPF, threatening to break “economic and fraternal” relations if the leftist Peronist administration of Fernández de Kirchner followed through with the plans.

In Madrid, María Dolores de Cospedal, secretary general of the ruling Popular Party (PP), said the government intends "to give an energetic response" after consulting with its European Union partners.

An EU delegation from Brussels was scheduled to arrive in Buenos Aires on Thursday to demand that Argentina respect the agreements it has signed with foreign investors.

"The EU has nothing against Argentina demanding that YPF invest more in the country, but it must be done respecting the commitments both sides adopt in their agreements," a Brussels source told the [stauchly anti-Cristina] Buenos Aires daily Clarín.

Cristina has seen how the EU is destroying the lives of millions of its citizens with German Chancellor Angela Merkel's insane austerity policies. And also how it has responded to the authoritarian, anti-democratic turn in the Hungarian government with enormous indifference. I'm guessing she's going to take a dim view of the EU siding with Spain's conservative government and Spanish multinational Repsol when the EU leaders are so plainly and cynically callous toward democracy and prosperity in the EU. Argentina has spent over a decade now recovering from the disaster they brought on themselves by the very policies with which the EU is destroying itself. I'm guessing her response to them will be some diplomatic version of, "Bite me".

A later report says that the EU Commission later characterized it as a bilateral dispute between Spain and Argentina. We'll soon see how the EU will proceed. My thought is they would be wise to stay out of it as much as they can. The EU also announced the cancellation of a scheduled visit of officials to Argentina this week; hard to tell if that's "retaliation" or "washing our hands of this one".

Also from El País' English-language articles, the Spanish government is huffing and puffing at the command of Repsol, the current government's exclusive purpose being to comfort the Spanish One Percent while the rest of the country faces staggering unemployment and a decline in real living standards. This is from a few days ago before Cristina's formal proposal: Andrew Sim, Spain ups the ante in its dispute with Argentina over Respol 13.04.2012.

Even early, columnist Mariano Marzo offered this excuse: "Yet they [the Argentine government] also ought to ask themselves whether the fall is not due to a more general and irreversible phenomenon: the ageing of the oil fields." (YPF, a victim of political hounding El País 10.04.2012) Yes, the oil fields are aging and Repsol has been using YPF as a cash cow to finance investments in other parts of the world and in dividend payouts, while not doing very much in the way of new exploration in Argentina itself.

Spain's government is threatening reprisals: Amanda Mars y Miguel Ángel Noceda, El Gobierno da por rota la amistad con Argentina y prepara represalias El País 16.04.2012; España calificó la medida como "un gesto de hostilidad contra nuestro país y nuestro gobierno" Página 12 16.04.2012 Repsol, not surprisingly, is initiating legal proceedings against Argentina. I'm very impressed with the loyalty of Spain's government to Repsol. And to the contrast between that and its loyalty to the needs of the Spanish people in their Angienomics austerity policies.

Sadly, the PSOE (Spanish Socialist Party) displayed how completely they have surrendered to neoliberal concepts by pledging their loyal support to Repsol, as well. Pitiful. PSOE head Alfredo Pérez Rubalcaba called Repsol president Antonio Brufau to show "todo el apoyo del PSOE a la compañía" ("the total support of the PSOE for the company") (my emphasis), the company being Repsol. That is just painfully pitiful. If he's not bought, he's leaving money on the table. Because companies pay well for that kind of support. That's just pathetic.

Tags: argentina, cristina fernández, psoe, spain, ypf

Argentina, Spain and YPF oil company

Here are several links to early articles on the proposal by Argentine President Cristina Fernández to compel the sale of a 51% majority ownership in the YPF oil firm, currently majority owned by the Spanish multinational Repsol. They are calling it an "expropriation", though there is an official governmental body in Argentina that will establish a price for the purchase of shares in YPF.

Rodrigo Orihuela, Argentina Will Seize 51% of YPF Under Fernandez Proposal Bloomberg 04/16/2012

The newspaper Clarín is bitterly "anti-K", as the Argentine press writes it, meaning anti-kirchernismo and specifically anti-Cristina Fernández de Kirchner, also commonly called Cristina and CFK in the press. Here are a couple of their early articles.

Cristina presentó el proyecto para expropiar el 51% de YPF

Clarín also provided a link on their front webpage Monday to an article about a vote by Cristina as a member of Congress in 1992 in favor of the privatization of YPF: Juan Cruz Sanz, El día que Cristina reclamó votar a favor de la privatización de YPF 04.04.2012

TV Pública Argentina provides a number of Spanish-language reports on the news, including these:

Cristina:"Corríamos el riesgo de transformarnos en un país inviable" 04/16/2012



Por la recuperación de YPF Dellatorre 2 04/16/2012



Análisis sobre la recuperación de YPF 04/16/2012 (also featuring Dellatorre):



Here is Cristina's speech after the official announcement of the legislative proposal, Cristina: "El modelo no es de estatización, sino de recuperación de la soberanía" 04/16/2012:



Tags: argentina, cristina fernández, spain, ypf

Cristina goes for it: proposes expropriation of 51% of YPF oil company

President Cristina's Fernandez has proposed to the Argentine Congress a law authorizing the expropriation of 51% of the YPF oil firm, currently majority-owned by the Spanish multinational Repsol: El Gobierno Nacional propuso la expropiación del 51 por ciento de YPF y declara de interés público el autoabastecimiento de combustible Página 12 16.04.2012

In her message on the proposal, Cristina noted that, even though Argentina has the third-largest reserves of natural gas after China and the US, Argentina is faced with the need to import both gas and oil for the first time in 17 years. She has criticized the Repsol subsidiary YPF, which was privatized in 1999, for insufficient investment in Argentine exploration and production. When it comes to exploration, they've essentially not done any Argentina since the company was privatized, having been a state-owned firm since its founding in 1922.

The President criticized them for having paid out in dividends since 1999 amounting to over 80% of the company's net worth, while failing to invest adequately in Argentina. Repsol has used YPF as a cash cow to fund its investments in other countries, notably Libya.

The logic of the free market from the perspective of a multinational corporation like Repsol may not meet the needs of an individual country like Argentina, which was clearly the case with YPF. Cristina said, "El problema fue la desnacionalización" ("The problem was the de-nationalization.")

Tags: argentina, cristina fernández, james galbraith, ypf

Argentina and the fight against the neoliberal "financialized playground"

Marcy Wheeler has an provocative Economic Big Picture post, based in part of Jamie Galbraith's new book, Inequality and Instability: A Study of the World Economy Just Before the Great Crisis (2012). (Amazon tells me my copy should get to me Thursday or so; maybe I should have gone for the Kindle version.) Her post is called The US Attempts to Retain Control Over the Financialized Playground Emptywheel 04/14/2012. She quotes Galbraith:

The financial crisis (and the world economic crisis it engendered) thus represented not so much the natural outgrowth of rising inequality as a further phase; it was the consequence of a deliberate effort to sustain a model of economic growth based on inequality that had, in the year 2000, already ended. By pressing this model past all legal and ethical limits, the United States succeeded in prolonging an "era of good feeling," and in ensuring that when the collapse came, it would utterly destroy the financial sector.

Marcy's long post gives some idea of the diverging economic models in the world, and the discrediting of the so-called "Washington Consensus" also known as neoliberalism among some of the countries with the strongest developing economies.

One front in the conflict between the neoliberal model and alternatives is in Argentina. I don't know that it has or needs a distinct name, though the political thinking and policymaking behind the current version is known as kirchnerism. President Cristina Feranández (de Kirchner) is positioning the Argentine federal government to begin taking a major ownership stake, maybe even a controlling one, in the country's largest oil company YPF (pronounced e-epe-efe in Spanish). YPF stands for Yacimientos Petrolíferos Fiscales. It is currently a majority-owned subsidiary of the Spanish oil company Repsol. Reuters reports, "Repsol, which holds a 57 percent stake in the company, has been gradually reducing its holdings as it frees capital to invest in other emerging markets such as Brazil. Argentina's Eskenazi family holds 25.5 percent." (Uncertainty over fate of Argentina's YPF persists 04/12/2012) The Eskenazi family's holdings are via Grupo Petersen (the Petersen Group).

This English-language report by Raphael Minder in the New York Times gives some background, Spain Cautions Argentina on Takeover of Energy Firm 04/13/2012. Minder notes accurately that "the government in Buenos Aires [has] gradually intensified its criticism of Repsol, accusing the company of not investing enough in Argentina and instead paying too much of its profits in dividends."

In its public demands, what Cristina's government is demanding is that YPF behave more responsibly and make more investments in oil production in Argentina. But she has also been acting in conjunction with the state (provincial) governors to revoke some of YPF's oil concessions, which no doubt has contributed significantly to recent drops in YPF's share prices, making the government threat of acquiring its shares more credible. As one might guess, the conflict has provoked speculation in YPF shares.

Spain's conservative government under Prime Minister Mariano Rajoy, currently enthusiastically applying Angienomics, the currently dominant variant of neoliberalism in the EU, to impoverish its own people, further deregulate businesses, reduce government services and weaken labor unions, is leaping to the defense of Repsol in its drive to maintain its current level of control over YPF, in a way that the current Spanish government can never be expected to defend the well-being of ordinary Spanish workers. That's the neoliberal creed. And, given the difficulties of implementing national economic suicide in a democratic system, Rajoy's government surely doesn't mind exploiting the moment to get a tiny bit of nationalistic cred. As Minder reports:

The Spanish government warned on Friday that it would take unspecified retaliatory measures against Argentina if it proceeded with plans to take back control of YPF, the large oil and gas producer, from Repsol, its Spanish parent.

The warning came as José Manuel Garcia-Margallo, the Spanish foreign minister, also announced that Spain had called on the European Commission, the United States Treasury and other governments in Latin America to support Spain in its efforts to prevent the nationalization of YPF.

Of course, the symbolism of Spain trying to ran stuff down the throats of Argentina isn't very good elsewhere. That ship pretty much sailed for good in 1816 during the reign of Fernando VII. Atilio Boron characterizes the reaction of Rajoy's government as "una virulenta reacción de funcionarios del gobierno ultraconservador español" ("a virulent reaction by functionaries of the ultraconservative Spanish government") (España, ¿cuál España? Página 12 15.04.2012). He also refers to them as "ardent functionaries of the Crown"; Spain is a constitutional monarchy. From the point of view of Argentina's strategic energy interests, writes Alfredo Zaiat, "los españoles de Repsol son parte del problema; no una opción de solución ("the Spaniards of Repsol are part of the problem; not an option of the solution") (Chiste catalán Página 12 15.04.2012). Repsol has been using YPF largely as a "cash cow", neglecting the development of reserves and further exploration in Argentina itself. The Great God Free Market is mainly concerned with the enrichment of shareholders, not with how it helps or hurts the general public or particular countries.

Trying to rally the EU, which of course includes Great Britain, around the cause of attacking Argentina is complicated by the fact that Rajoy's own government has piggy-backed on Cristina's diplomatic push to force Britain to the negotiating table over the status of the Malvinas Islands, illegally occupied by Britain since 1833, to press Spain's claims for sovereignty over Gibraltar. European colonial oil interests are also at play in the controversy over the Malvinas, because Britain claims offshore mineral rights through its colonial occupation of the Malvinas/Falklands.

Raúl Dellatorre looks at the issues surrounding the status of YPF in Por qué y para qué una YPF del Estado Página 12 15.04.2012. Cristina's government rejects the neoliberal theology of the Great God Free Market (my formulation, not her government's or Dellatorre's). In the case of oil and natural gas, her government views them as strategic assets that cannot be treated simply as commodities in a global free market. Having sufficient petroleum production at home and their availability at affordable prices are critical to the larger health and international competitiveness of the Argentine economy. As The Economist noted in its series earlier this year on "state capitalism", the thirteen largest oil firms in the world are state enterprises of some sort or the other.

Dellatorre cites the examples of PDVSA and Petrobras, the state oil companies of, respectively, Venezuela and Brasil, as models in which the extraction of oil and gas can be shared with private companies but the priorities and uses of the product are under the direction of the state. PDVSA is fully state-owned, Petrobras partially so.

See also: Andrés Asiain y Agustín Crivelli, La explotación de hidrocarburos en Argentina - Estudio de caso; YPF S.A. Feb 2012

Tags: argentina, cristina fernández, james galbraith, ypf