Argentina presents plan to seize control of Repsol's YPF

Argentina's President Cristina Fernandez on Monday presented a bold plan to seize control of leading oil company YPF by nationalising the shares owned by Spain's Repsol.

It's a move to expand the state's control over Argentina's energy reserves despite fierce criticism from abroad.

Fernandez said the government would ask Congress, which she controls, to approve a bill to expropriate a controlling 51 percent stake in the company by seizing shares held exclusively by Repsol, saying energy was a "vital resource".

Argentina is an oil-producing nation that this year expects to import more than 10 (b) USD billion worth of gas and natural liquid gas in the face of an energy crisis, according to estimates from the hydrocarbon sector.

Government officials have now taken over the company until the decree is passed by congress.

Fernandez has put Federal Planning Minister Julio de Vido and Economics Vice Minister Axel Kicillof - the new rising star in Fernandez's cabinet - in charge of handling the expropriation.

Take charge

De Vido, escorted by the governors of the 10 oil-producing provinces went to the YPF tower in the financial district of Buenos Aires on Monday to formalise the new situation with representatives of the company.

"Once the decree by the president of the nation was made public, Julio de Vido came here to take charge, a document was signed with Mr Mauro Dacomo (a YPF senior official) acting as representative of the director and of the company," Jorge Sapag, Governor of the province of Neuquen said on Monday.

Argentinean and Spanish media reported that all of the top Spanish executives at the Repsol-YPF building were asked to pack their belongings and leave.

Governors of oil-producing Argentine provinces have withdrawn about 15 oil leases, representing 18 percent of YPF's crude production, alleging the company failed to keep its promises to develop them.

Fernandez said that Argentina had a deficit of three (b) billion dollars last year partly due to energy imports.

"We are the only country in Latin America, and I would say in practically the entire world, that doesn't manage its own natural resources," Fernandez said.

She said her proposal "is not a model of statism" but "the recovery of sovereignty."

Retaliation

But analysts said the move risks alienating foreign investors and prompting retaliation from Spain's government.

There was no explanation of how, or how much, Repsol and its stockholders would be compensated.

Analysts say that the government might have to use Central Bank reserves, or funds from the National Social Security Administration pension fund to pay for the takeover.

Even with its share prices depressed, YPF last week were valued at 13.6 (b) billion USD, and buying half of that would deplete Argentina's treasury of funds it needs to maintain the populist subsidies that have kept the country's economy afloat.

Repsol released a statement promising to protect the interests of its shareholders.

Span's Foreign Minister has called the move arbitrary, and said it broke the climate of cordiality and friendship that had existed with Argentina.

The European Commission has warned that nationalising YPF would be bad for the investment climate in Argentina, and has said it backs Spain in the standoff over the subsidiary.

YPF is Argentina's biggest company, and Spain is Argentina's largest foreign investor, with the United States in second place.