Argentina: Expropriation Of YPF Shares Starts Debate

By Hernán Scandizzo

In early May, Argentina’s Congress passed the Executive-driven Hydrocarbons Sovereignty law by an overwhelming majority. The entirety of the ruling party and a large part of opposition parties approved the legislation, which expropriated 51 percent of YPF’s shares that were held by Spanish oil firm Repsol. It also declared self-sufficiency in hydrocarbons as well as in exploitation, industrialization, transportation and marketing to be “of national public interest and a primary objective of the country,” and created the Federal Hydrocarbon Council.

The expropriation drew the most political and media attention, but declaring hydrocarbons to be of public interest was just as important, because it means removing them from market regulations to consider them as strategic resources subject to the needs and interests of the country, or at least that’s what some sectors maintain in the debate that began with the presentation of the bill and has yet to end.

The law came in the midst of an energy crisis, attributed to the lack of investment in exploration and development of oil fields by private companies, which resulted in the massive importation — US$9.4 billion in 2011 — and a trade deficit of $3 billion in the sector. For that reason, the most skeptical analysts believe the Argentine government isn’t looking for a change in policy regarding natural resources, but rather the move to nationalize is a pragmatic one.

“I don’t think we’re headed toward an alternative [option]; in any case, it’s more of the same but painted in national colors. The only reason I can understand the government taking such a decision is because of fiscal pressure,” said to Latinamerica Press Andrés Dimitriu, professor and researcher in the Department of Communications at the National University of Comahue, or UNCo, and member of the Union of Patagonian Assemblies, which unites socio-environmentalist groups from various cities in Southern Argentina.

Breaking point?

Across the playing field, the move garnered support for different reasons. “The political, economic, and social role of natural resources hasn’t been discussed to a certain extent; I think the Hydrocarbons Sovereignty law is marking an important breaking point,” said Ignacio Sabbatella, a political science graduate from the University of Buenos Aires. “I think it is a very positive move and it recuperates strategic control [of the resource] by the state, even though it is 51 percent of YPF; it’s going to give it a renewed role as protagonist in the hydrocarbon sector. It also reestablishes the notion that it’s about strategic resources, rather than the concept of the neoliberal model of the 1990s, which had made them into a commodity on the market and, above all, aimed at international markets through exports.”

“It’s important to have taken this step to nationalize 51 percent of the shares, because it serves to take on a project for change, to move away from a dark part of Argentine history, when sovereignty over oil was lost; but this doesn’t guarantee anything about how the project will turn out. Argentina has to recuperate full sovereignty of 100 percent of hydrocarbons, and YPF only represents 30 percent,” Juan José González, economist and UNCo professor, told Latinamerica Press.

While highlighting the importance of declaring the industry of national public interest, González said: “The public is going to have to pay attention to what decisions are made, if they truly represent the national interest or if the large multinationals are going to keep controlling oil in Argentina.”

His doubts were based on YPF’s decision to partner with US firm Exxon to develop unconventional oil fields. “If we are trading the collar of Repsol for the collar of Exxon but the dog remains the same, there isn’t really a state intervention to recuperate sovereignty, because private companies will continue to act as if hydrocarbons are still a commodity and, as such, their objectives are to maximize profits.”

Sabbatella, meanwhile, downplayed the scope of these partnerships, “YPF alone won’t be able to carry the full weight of self-sufficiency; this will be a joint effort in which the state will have to set clear rules for the country’s interests.”

Through a press release, the Indigenous Confederation of Neuquén applauded the expropriation of YPF as a “first big step to regain the hope to start a new phase, participatory, capable of overcoming the remnants of neoliberalism.” Nevertheless, this organization, which unites the communities affected by oil drilling, warned: “Regaining self-sufficiency, increasing reserves and production and determining new investment goals […] can never again be at the expense of our lives, cultures, and rights.”

Megamining

“I totally differentiate this measure from the mining sector, where policy until now has been diametrically opposed, because the state hasn’t had a central role. In fact, it’s had a role in promoting greater investment, especially with major transnational capital,” said Sabbatella. “You can sense that some changes are coming in the mining sector, all signs point to the national and provincial governments beginning to assume a greater role. Until now, the most that has been discussed is how to tap into a larger portion of mining revenue. Perhaps the discussion that is coming is whether these resources that are being extracted would serve to bolster a more markedly industrial economic model.”

For Sabatella, it’s imperative to “discuss more why gold and other minerals that aren’t being directly used in the country are being mined, what the balance is between needing to mine those resources and the environmental impact it has. It’s a tension that is also present in the case of hydrocarbons, but ultimately — given the country’s need to drill for oil and gas (fossil fuels account for 90 percent of primary energy sources) — the balance tilts more toward fulfilling energy needs.”

Meanwhile, Dimitriu said that the creation of joint provincial mining companies is similar to the model of a state-controlled YPF. And he speculated that the aim is not to grab onto a “miniscule” fraction of revenues, but to shield the mining and extractives sectors from political fluctuations that could occur, including those resulting from the sustained opposition to megamining projects throughout the country.