FIRST they came for the pensions, then they went for the central-bank reserves. Argentines have wondered for years which kitty Cristina Fernández, the president, would grab next in order to satisfy her government's voracious appetite for cash. On April 16th they got their answer, when she announced that Argentina would expropriate and nationalise 51% of YPF, the former state oil company, which had been sold to Repsol, a Spanish firm, in 1999. Of the confiscated portion, 51% will go to the national government and 49% to Argentina's oil-producing provinces. The president did not reveal how much she plans to pay Repsol in exchange. “We are the only country in America, and basically in the whole world, that doesn't control its own natural resources,” she declared—a puzzling assertion, since foreign companies own resource assets in every oil-producing country in the Americas save Mexico.
Argentina is rich in resources. Following a series of big discoveries, its reserves of shale hydrocarbons may turn out to be the world's third-biggest. Nonetheless, in recent years the country has gone from being a net exporter to a net importer of energy, pulling both the fiscal and trade balances into deficit. Hernán Lorenzino, the economy minister, claims Argentina's only goal is “energy self-sufficiency”.
The government says it has been forced to import because Repsol has failed to invest in domestic production. In recent months, six provinces confiscated oil concessions from YPF on that basis. But YPF counters that it has invested $11 billion in its Argentine operations over the past five years, and only distributed $3.5 billion in dividends—many of which have gone to pay the loans that Petersen, an Argentine company, took out to buy a share of the company with the support of Néstor Kirchner, Ms Fernández's husband and predecessor as president. Moreover, Repsol says that the real cause of Argentina's declining energy trade balance is its maze of price controls and subsidies, which makes investment unprofitable and encourages excess consumption. Most independent energy analysts agree with this analysis.
Taking over YPF offers Ms Fernández both financial and political benefits. She can now use it to conduct the government's money-losing energy imports and have its minority shareholders suffer 49% of the losses. At a time of high oil prices, she could also use the company's profits to finance public spending, since Argentina cannot borrow money because it faces punitively high interest rates and legal threats from holders of its defaulted debt. Politically, after failing to convince the rest of the countries at the Summit of the Americas last weekend to support Argentina's claim to the British-controlled Falkland Islands, the decision provides her a new foreign scapegoat to distract attention from a slowing economy. On the day of the announcement, posters went up around Buenos Aires reading “True sovereignty means taking back what is ours” above the YPF logo.
