Argentine President Cristina Kirchner announced the nationalisation of Federal Petroleum Deposits (YPF), the country's largest oil extractor and refiner, on April 16.
Altogether, 51% of Spanish oil multinational Repsol's 57% stake in YPF has been claimed by the Argentine government.
The move shook the markets, with YPF shares falling 30% on the New York stock exchange.
The nationalisation has drawn condemnation from Spain, the European Union and the United States ― as well as US regional allies Chile, Colombia and Mexico. In contrast, it was applauded by Venezuela and Bolivia.
Spanish Prime Minster Mariano Rajoy called the action “unjustifiable”, Europapress.es said on April 17. Mirroring the International Monetary Fund, he said it would damage investor confidence, thereby “harming all of Latin America”.
However, the article reported Venezuelan President Hugo Chavez said the decision “aligns with the principle of sovereign control over natural resources”.
Kirchner said the move was justified by the intransigence of Repsol-YPF. Repsol has reduced investment in oil and gas extraction and refining since taking full control of the previously state-owned company in 1999.
As a result, oil imports cost Argentina US$9.4 billion last year, more than double the cost in 2010.
This has raised Argentina's trade deficit at a time when it has little access to international credit markets, due to its default on international debt to groups such as the IMF in 2002.
In her announcement, Kirchner made the point that eliminating fossil fuel imports would double Argentina's trade surplus.
The government has said one goal of the nationalisation is to return Argentina to an exporter of fossil fuels. Recent discoveries have given Argentina the third-largest reserves of shale oil and gas in the world.
Tiempo Argentino reported on April 8 that since 1999, oil extraction has fallen by 43%. YPF's refining capacity fell by 18% between 2007 and last year, despite rising demand and rising oil imports
Meanwhile, Repsol continues to direct dividend payments to shareholders overseas, mostly in Spain, and invest heavily in other ventures. One of Repsol's main prospects is Libya's oil fields, newly opened to international corporations since the Western campaign to overthrow Muammar Gaddafi.
Another is capital investment in developing Spain's own offshore oil fields around the Canary Islands.
This undermines the idea, pushed by neoliberals, that privatisation works in the “national interest”.
The pro-corporate press have argued that Repsol's hand was forced by the Argentinian government's “flawed energy policy”, which includes price caps on natural gas. This has been denounced as backwards, populist and self-defeating.
Ultimately, it seems that both sides had little choice. Repsol is bound to the corporate principle of investing in the most profitable ventures available. This did not include providing affordable natural gas and petrol, under a scheme of price caps, to the people of Argentina.
Given the failure of Kirchner's policy of price controls, nationalisation was the most feasible way to maintain affordable access to energy for the population while seeking to end dependency on oil imports.