- Industrial News
Argentina Swoop Scuppers China Oil Deal
Repsol tried to sell a controlling stake in its Argentinian oil company to a Chinese energy group before it was nationalised by Buenos Aires, according to two people familiar with the talks.
The secret attempt to sell its 57 per cent interest in YPF to the Chinese buyer, which one person involved identified as Sinopec, broke down after the Argentinian government announced on Monday that it would expropriate 51 per cent of the company. Repsol wanted more than $10bn for its stake and did not advise Buenos Aires of the discussions with Sinopec, which the Spanish group hoped to finalise before seeking formal endorsement from Cristina Fernández, Argentine president.
The Argentinian government holds a golden share in YPF and any deal would have required state approval. Sinopec holds 40 per cent of Repsol's Brazilian operations. Repsol declined to comment. Sinopec could not be reached for comment.
Anger mounted in Europe and Latin America on Tuesday at the Fernández government's decision to seize a controlling stake in YPF. On a visit to Mexico, Mariano Rajoy, Spanish prime minister, expressed "deep unease" with Argentina's move and said it lacked "any justification or economic reason".
Felipe Calderón, Mexican president, called the nationalisation "lamentable". He added: "No one in their right mind is going to invest in a country that expropriates investments."
Repsol meanwhile said it would pursue Argentina for at least $10bn in compensation for the YPF stake and is seeking international arbitration. "These acts will not go unpunished," said Antonio Brufau, executive chairman. "The Argentinian president has committed an illegal and unjustifiable act . . . This is just a way of covering up the social and economic crisis facing Argentina."
In Brussels, José Manuel Barroso, European Commission president, told reporters he was "seriously disappointed" by Argentina's move and urged authorities there "to uphold their international commitments and obligations". The Commission postponed a joint co-operation conference with Argentina scheduled for April 19, and suggested further measures were possible.
Ms Fernández also faced domestic condemnation. "This decision will get us billions of pesos into debt and distances us from the world," said Mauricio Macri, the mayor of Buenos Aires. "We're all going to pay for this in Argentina."
Analysts, however, expressed doubt about Repsol's chances of winning significant compensation in tribunal. "Argentina already has more disputes pending against it at the World Bank's International Centre for Settlement of Investment Disputes than any other country," said Peter Hutton, an analyst at RBC Capital Markets, citing cases stemming from the country's debt default 11 years ago.
Madrid has said it is considering "clear and decisive action" in the coming days, and summoned Argentina's diplomat on Tuesday morning.
Following earlier warnings over YPF from Madrid, Ms Fernandez said on Monday she would not bow to "threats". "I'm the head of state, not a hoodlum," she said.
In response, José Manuel Soria, Spain's industry minister, said on Tuesday: "With this attitude and hostility there will be consequences that we will see over the next few days."
Additional reporting by Adam Thomson in Mexico City and Joshua Chaffin in Brussels.