SALON

Thursday, Apr 19, 2012 4:15 PM UTC

Spain-Argentina oil spat threatens special ties

By

Topics: From the Wires,

Spain-Argentina oil spat threatens special tiesA sign reading in Spanish "They are ours. CFK. YPF. They are Argentine" hangs in Buenos Aires, Argentina, Tuesday April 17, 2012. President Cristina Fernandez pushed forward a bill to renationalize the country's largest oil company on Monday despite fierce criticism from abroad and the risk of a major rift with Spain. Fernandez said the legislation put to congress would give Argentina a majority stake in oil and gas company YPF by taking control of 51 percent of its shares currently held by Spain's Repsol. (AP Photo/Natacha Pisarenko)(Credit: AP)

MADRID (AP) — Argentina’s hostile takeover of its top energy company from Spain’s Repsol marks a turning point in traditionally cordial relations between two countries that have built strong ties over a century. As the spat escalates, some fear the damage may be lasting.

Argentine President Cristina Fernandez has defended the move to re-nationalization of YPF as part of a drive to restore her country’s sovereignty, increase oil production and rely less on hydrocarbon imports.

Repsol and Spain deride it as outright “pillaging” and an attack on their interests.

In both countries, the citizenry is behind the respective governments. In Spain, for instance, 90 percent of people polled condemn the expropriation of YPF, the Argentine unit of Repsol, according to a survey released Wednesday by the Elcano Royal Institute, a Madrid think tank. Repsol acquired a majority stake in YPF in 1999.

With Argentina seemingly unwilling to backtrack on the announcement despite protests from Spain, the European Union and elsewhere, Spain made clear it is preparing to hit back hard with support from its European partners. Spanish Industry Minister Jose Manuel Soria said the reprisal will be diplomatic and commercial in nature.

The U.S. State Department has said the YPF expropriation could have a negative effect for Argentina’s economy and investment in that country.

The question is how far the two countries will bring the spat.

“I think that there will be a before and after in Spanish-Argentina relations because of the expropriation of YPF,” said Carlos Malamud, Elcano’s chief researcher on Latin America. “This might continue to escalate, if the outbursts and tough messages in both directions continue.”

In economic terms, Spain has more to lose, mainly because many Spanish companies operate in Argentina — from banks like Banco Santander S.A. to Banco Bilbao Vizcaya Argentaria S.A. and Telefonica S.A.’s mobile phone unit Movistar.

Many arrived in 2001, when an economic and banking crisis in Argentina coincided with a period of peak expansion in the Spanish economy.

But a decade later, it is Spain which is enduring its worst economic crisis in 30 years. And Spanish companies have failed to achieve a good image in Argentina in particular and Latin America in general, studies show.

Repsol’s shares continued to tumble Thursday, shedding 4.8 percent to close at €14.7 ($19.2) on Spain’s Ibex 35 index. They fell 6 percent on Tuesday — the first day of trading after the Argentine announcement — and dropped a further 6.2 percent on Wednesday. To add to the company’s woes, rating agency Standard & Poor’s downgraded its long-term corporate credit score for the company to BBB- — one notch above junk — with a warning that it could lower that score in the future.

Spain is the top foreign investor in Argentina, ahead of the United States. Spanish direct investment in Argentina totaled $23 billion in 2010. That was 26.3 percent of the total invested in that country, compared with 16.8 percent for the United States, according to the Argentine central bank.

Argentine investment in Spain totals just $60 million.

The trade balance also favors Argentina and has not stopped growing since Fernandez became president in 2007.

In 2011, the worst year yet in Spain’s economic crisis, Spanish imports from Argentina totaled €2.1 billion ($2.7 billion). This was practically double the amount of Spanish exports to Argentina — €1 billion ($1.31 billion), according to figures from the Spanish Economy Ministry.

However, Spanish imports from Argentina — mainly foodstuffs and chemicals — account for just 0.8 percent of its total imports. So the Spanish government could have room to maneuver in response to possible sanctions from Argentina without Spain’s overall trade balance being effected.

Also, Spain belongs to the 27-member European Union, which could freeze trade accords with Mercosur, the trade bloc that is made up of Argentina, Uruguay, Brazil and Paraguay.

It is taken for granted that Spain will air its complaints in all international forums, including the Group of 20 industrial powers. Its summit in Mexico in June could bring Fernandez and Spanish Prime Minister Mariano Rajoy together face to face for the first time.

“If Argentina’s message is that it will continue to do what it feels is right to defend its interests but in a unilateral way, agreement will be difficult even in the event (the two leaders)can meet face to face,” Malamud said.

Besides economic relations, there is another, less tangible link between the two countries — a form of international “brotherhood” and solidarity that Spanish Foreign Minister Jose Manuel Garcia-Margallo said was broken by the YPF expropriation announcement.

The countries have enjoyed warm relations since Argentina gained independence from Spain in 1810. There are strong cultural links as well as family ties, both from the colonial period and modern times.

In the worst stretches after the Spanish civil war of 1936-39, tens of thousands of Spaniards chose Argentina as a place to emigrate and start a new life. Decades later, military dictatorship in Argentina and then the crisis known as the “corralito” — when people could not withdraw their money from banks in 2001 — saw thousands of Argentines come to Spain.

“This is a relationship forged over the course of a century. These are intensive ties with very intensive migratory movements also,” Malamud said.

“The movement of intellectuals, writers, scientists and professors has been constant, if you track the intellectual history of the two countries,” he added.

In that sense, Malamud said the YPF case threatens historical, preferential relations between the two countries.

“The worst-case scenario we are facing is the severing of diplomatic relations. This is a scenario that cannot be ruled out,” he said. “The two sides should tone down their language and their message, which encourages nationalism on both sides.”

____

Ciaran Giles contributed to this report.

More Jorge Sainz.

Next Article

Related Stories

More Related Stories

Featured Slide Shows

The week in 10 pics

close X
  • Share on Twitter
  • Share on Facebook
  • Thumbnails
  • Fullscreen
  • 1 of 11
  • Lisa Montgomery embraces her nephew Thursday after a tornado tore apart her home in Cleburne, Texas. The twister killed six people and destroyed entire swaths of the North Texas town.
    Credit: AP/LM Otero

  • Jack McMahon, the defense attorney for abortion doctor Kermit Gosnell, speaks outside the Criminal Justice Center Philadelphia Tuesday. His client was convicted of killing three babies in his clinic, and will serve multiple life sentences.
    Credit: AP/Matt Rourke

  • A photo taken Monday captures Vice President Joe Biden's response to a Milwaukee second-grader's innovative proposal to end America's epidemic of gun violence. This guy!
    Credit: AP/Jenny Aicher

  • Sen. Rand Paul, R-Ky., flanked by a grouper-eyed Michele Bachmann, addresses the IRS' admission that it targeted Tea Party groups in advance of the 2012 election. In an op-ed for CNN Thursday, the Kentucky senator slammed the president for his faux outrage.
    Credit: AP/Molly Riley

  • Ousted IRS chief Steven Miller is sworn in on Capitol Hill Friday. Miller testified before the House Ways and Means Committee on the extra scrutiny the agency gave conservative groups applying for tax-exempt status.
    Credit: AP/J. Scott Applewhite

  • Attorney General Eric Holder pauses as he testifies on Capitol Hill before the House Judiciary Committee Wednesday. Holder is under fire, among other things, for the Justice Department's gathering of phone records at the Associated Press.
    Credit: AP/Carolyn Kaster

  • O.J. Simpson sits during an evidentiary hearing at Clark County District Court in Las Vegas, Nev., Thursday. Simpson, who is currently serving a nine-to-33-year sentence in state prison for armed robbery and kidnapping, is using a writ of habeas corpus to seek a new trial.
    Credit: AP/Las Vegas Review-Journal/Jeff Scheid

  • Major Tom to ground control: On Sunday astronaut Chris Hadfield recorded the first music video from space, a cover of David Bowie's "Space Oddity."
    Credit: AP/NASA/Chris Hadfield

  • When it rains it pours. President Barack Obama speaks during a news conference Thursday with Turkish Prime Minister Recep Tayyip Erdogan, inexplicably inspiring an #umbrellagate Twitter meme.
    Credit: AP/Jacquelyn Martin

  • A smoke plume rises high above a road block at the intersection of County A and Ross Road east of Solon Springs, Wis., Tuesday. No injuries were reported, but the the wildfire caused evacuations across northwestern Wisconsin.
    Credit: AP/The Duluth News-Tribune/Clint Austin

  • Recent Slide Shows

  • Share on Twitter
  • Share on Facebook
  • Thumbnails
  • Fullscreen
  • 1 of 11

Related Videos

Comments are not enabled for this story.

follow salon

Most Read

Popular on Reddit

links from salon.com

vote
New Yorker launches tool by Aaron Swartz to protect leaks: Strongbox, co-created by the late technologist, is an open-source drop box for leaked documents
210 points211 points | 7 comments
vote
New Yorker launches tool by Aaron Swartz to protect leaks: Strongbox, co-created by the persecuted late technologist, is an open-source drop box for leaked documents
154 points155 points | comment
vote
Loaded terminology like "entitlements" and "welfare" skews the debate and alters America. How right-wingers use semantic tricks to kill government.
85 points86 points | 26 comments
vote
Obstruction will ruin the GOP: Playing politics and abusing the system can excite the extremes, but it's a recipe for long-term political disaster
46 points47 points | 8 comments
vote
With the help of Photoshop, artist Yao Lu has made shanshui — traditional ink paintings — of China's landfills
23 points24 points | comment

From Around the Web

Presented by Scribol
listener_new_rect The Listener: So long, Sookie Stackhouse

Recommendations