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Argentina rejects Spanish demand of nine billion for YPF

The Americas Post - Tempers are flaring over Argentina's recent move to nationalize YPF

Spanish oil company Repsol-YPF announced it will demand over nine billion dollars from Argentina for nationalizing 51 percent of its YPF division, a price tag that has already been rejected by authorities in Buenos Aires.

The Argentine government’s decision to take control of the company has sparked a diplomatic crisis between Argentina and Spain, while provoking a flood of international criticism against the South American country for the abrupt action.

Argentina’s President Cristina Fernandez on Monday spoke of the country’s largest oil company, which generates half of Repsol-YPF’s revenue, and sent her Congress a bill to expropriate 51 percent of its shares after months of  pressure and blame for reduced oil production in the country.

After years of spending millions on imports that undermine its trade surplus, Argentina wants to regain energy independence.  Many analysts however, doubt that nation’s ability to compensate Repsol-YPF and also find the money for the necessary investments.

“We’re going to request a total valuation of 18 billion dollars,” said Repsol chairman Antonio Brufau, in a two-hour press conference.

Repsol, which held 57.43 percent of YPF, called the decision illegal, but Argentina disputes the amount demanded by the Spanish.

“We will not pay what they say, as Mr. Brufau, 10 billion dollars,” said Deputy Economy Minister Axel Kicillof, speaking before the Senate.  “The valuation of YPF will be based on objective data rather than stock market speculation,” he said.

YPF’s market capitalization is currently about 10.4 billion dollars, but the company has lost nearly a third of its value already in 2012 due to pressure from Argentina and fears of expropriation.

Kicillof said he is reviewing “secret” information to determine the company’s market value.

“The numbers the directors or former directors were talking about in a very careless way about the value of the company will be reviewed as we learn the intricacies of secret information that the company handled,” he told senators.

An Argentine Senate committee began Tuesday to discuss the proposed expropriation, in a meeting attended by Kicilliof and the current auditor of YPF, Planning Minister Julio De Vido.  During the meeting there were harsh exchanges between legislators and officials.

Kicillof suggested that in recent years Repsol funded its international expansion by “squeezing” YPF for the dividends that the company distributed.

According to local law, Argentina should negotiate with Repsol-YPF for compensation. In case of disagreement, a court will decide based on an appraisal yet to be agreed on.

“The range of defensive measures that could be taken is broad and may include individual or class actions in the various countries involved, including  civil or commercial claims for compensation for damages, ” said Brufau.

Argentina already owes hundreds of millions of dollars outstanding in antigovernment decisions in international court.

Argentina’s decision sparked a wave of criticism in the international community, from Madrid to the EU and Mexico.  The Government of Spain confirmed that the case will be discussed on Friday in cabinet.  Speaking at an event in Mexico, Spanish Prime Minister Mariano Rajoy expressed “deep distress”.

“The company has been seized without any justification or economic reason, and they have to explain what happened”, he said.

European Commission President Jose Manuel Barroso said Tuesday he expects Argentina to respect international agreements on protection for business with Spain.

“I am seriously disappointed by the announcement yesterday. I hope that the Argentine authorities respect their international agreements and obligations, particularly those resulting from a bilateral agreement on investment protection in Spain,” said Barroso.