EU gives Spain 'full backing'

The European Union announced on Tuesday that it had "postponed" a planned EU-Argentina Joint Committee meeting scheduled for Friday. The move came in response to Argentina's announcement that it would nationalize the YPF oil company, a subsidiary of Spanish firm Repsol.

"I'm seriously disappointed about yesterday's announcement," European Commission President Jose Manuel Barroso said. "We expect Argentinian authorities to uphold their international commitments and obligations."

The bloc's foreign affairs chief, Catherine Ashton, elaborated further on the sudden announcement, saying that it "adds to a number of problematic decisions taken by Argentina over the past few years in the areas of import restrictions and investment policy."

Also calling the issue a cause of concern, she said the commission was analyzing "all possible actions" in response.

"The measure creates legal uncertainty for all EU and foreign firms in the country," Ashton said. "The Spanish government has our full backing in this matter."

Repsol and Spain seek restitution

Spanish oil company Repsol, whose 57.4 percent holding in YPF was all but wiped out when Argentina announced it would take a 51 percent stake in the company, has since said that it would seek financial compensation.

"These acts will not remain unpunished," Repsol executive chairman Antonio Brufau said. He estimated that the 51 percent share in YPF was worth roughly $10.5 billion (almost 8 billion euros). Argentina has said the valuation is too high, claiming YPF is heavily in debt and may have to pay penalties for environmental cleanup costs.

Deputy Economy Minister Axel Killicof, one of the ministers named as the new bosses of YPF, said when asked what Repsol might be paid: "We're going to see where they threw out each cubic meter of contaminated water."

Spanish Industry Minister Jose Manuel Soria meanwhile described Argentina's decision as a "very clear gesture of hostility" against the government in Madrid.

Argentina's president, Cristina Fernandez, said the nationalization of YPF was a response to Repsol, who she said had not invested sufficiently in oil production and exploration. She also said the Spanish company was exporting too much oil, creating energy shortages in Argentina.

Repsol purchased a controlling stake in YPF in 1999 at a cost of $15 billion, saying it has since invested a further $20 billion in the company.  Prior to the takeover, YPF was state-owned.

Fernandez has already nationalized Argentina's flagship airline and private pension funds, saying it's part of a plan to restore the country's sovereignty.

Repsol boss Brufau said on Tuesday that the decision was tied to the recent discovery of the Vaca Muerta shale oil and gas fields - thought to be one of the largest known reserves in the world.

msh/ccp (AFP, AP, dpa)