Jeremy Hobson: Imagine it’s 1999 and you’re a Spanish oil company — a huge Spanish oil company — with operations all over the world. We’ll call you Repsol. And all of a sudden, a big country with lots of oil — Argentina — has a total financial collapse. You buy their oil company, called YPF — and everybody’s happy. Until April of 2012 when Argentina decides it wants its company back and its president announces plans to just take it; nationalize it.
That’s what happened yesterday, and the BBC’s Tom Burridge joins us now from Madrid to explain. Good morning.
Tom Burridge: Good morning, Jeremy.
Hobson: Well, it seems kind of drastic to just nationalize a big foreign-owned company. Why is Argentina thinking about doing this?
Burridge: Well Argentina essentially says this is about its sovereignty; that it’s paying a lot of money for its energy costs from importing it from elsewhere. And essentially, it wants YPF — that was a national Argentinean company about ten years ago — to become one again; and it to control the assets of that company, rather than it be controlled by Repsol, which is a big Spanish energy company.
Hobson: And I imagine that this whole thing has not gone down very well in Spain.
Burridge: It’s gone down like a lead balloon. I mean, essentially, this has been brewing for the last few weeks. On Friday, for example, Spain put clear warnings out to Argentina, really saying: Don’t you dare. So I think in a way, Madrid has been caught by surprise to a certain extent when Cristina Fernández de Kirchner, the Argentinean president, made this announcement yesterday.
I mean, Spain’s rhetoric so far has been as hostile as they come. The foreign minister here — the Secretary of State, if you like — has been saying that this is a hostile act against Spain and the Spanish people, and has promised reprisals: clear and forceful measures, he says.
Hobson: Well and I’ve seen some of the analysts who talked about this have said: OK, maybe Argentina would win in the short-run, but they would create a business climate that no international company would ever want to invest in.
Burridge: That’s right; that’s the danger, I think, for Argentina. Argentina and Spain, before this row began to brew, were strong trading partners, political friends. Relations have turned suddenly very, very icy. And if you look at it from a business perspective, what will this say to foreign investors? Are some foreign investors going to look at Argentina, see what they’ve done with YPF, and actually think, “Oh, should I invest in Argentina in the future?” That’s the danger.
Hobson: Finally Tom, this is the first time we’ve talked to you in a while and it hasn’t had to do with the European debt crisis and the problems that Spain is facing right now. I imagine that a situation like this — if a big part of their company gets taken over by Argentina — that wouldn’t help Spain’s crisis at all?
Burridge: That’s right. YPF being nationalized by Argentina hurts Repsol; Repsol is a big, big, big Spanish company; Spain’s economy is really struggling in terms of unemployment, in terms of growth. This is not the kind of issue that Spain’s government would want at any time, let alone now.
Hobson: The BBC’s Tom Burridge in Madrid. Thanks a lot.
Burridge: Thank you.
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