Tuesday, April 17, 2012


The title refers to the Argentine Oil business, majority owned by Spain's Repsol...

...until now. (link via PJMedia as FT is partly paywalled)

Classic Peronist thuggery by the Argentine government: A legislative decree nationalizing all the Repsol shares on an uncompensated (at least as presented) basis.

Spain, reacting to this both as proxy for Repsol *and* because of the massive position of Spanish and other EU banks in Repsol is rightfully furious. Here's the BBC version of that story:
Promising a "clear and overwhelming" response, Spain summoned the Argentine ambassador to express its concern.
...and were this "the old days", said ambassador would shortly be headed home with an ultimatum "backed by the sovereign power" of Spain. That's *probably* not the message this time. What is in the package, however, is almost certainly statement of a joint Spanish-EU opposition to the nationalization of YPS shares (and only the foreign-owned shares) by Argentina and the implication of what the EU could do to Argentina's export markets by sanction.

Meanwhile, real harm has already resulted: Repsol-YPS CDS Surge (CDS being Credit Default Swaps).

Argentina is rapidly managing to offend most all of their trading partners and what few friends they have left. The Chavistas are still on their side, but that's like having the Mafia think highly of you... maybe helpful, but rarely a good character reference. Oh, I guess we have to count inept but vaguely supportive guys, too.

The rest of us, however, would like to see Argentine President Cristina Fernandez de Kirchner take some lumps for this latest outrage.


Mr. Bill said...

The Chavistas are still on their side, but that's like having the Mafia think highly of you...

Isn't that kind of insulting to the (we're not openly in charge of anyone's country) Mafia?

I imagine, considering the really heinous austerity measures Spain has put into place just to stay afloat that having $5bn in investment capital yanked out from under your banks and prominent groups & individuals is going to make you just a little upset. Could they consider this an act of war? I mean, that'd be a helluva way to get out of the deep recession -- fire up the military industrial complex and go all imperialist on Argentina. I'd think Spain would find England friendly to the idea, at least.

Sure, this is half-comical blue sky speculation on my part... but boy, Argentina's timing isn't real good. If Spain does have any war drum beaters, I expect the noise in their assembly is going to get pretty loud.

Bad news too that King Juan Carlos I is down with a broken hip. Not a great position to be in to prosecute a war.

L.Douglas Garrett said...

@Mr Bill

Yeah, I was worried about that; cleared it with Vinny before I posted it. ((grin)) Seriously, since the Chavistas have moved so far toward running Venez as a Narcostate, the more likely similarity would be to petty gangsters with too many guns. Anyway...

"act of war"? : I've argued two points here over the years on Acts of War (Casus Belli), and both still apply in this case.
(1) since the adoption of the UN Charter (proposed 1945, declared 1948, formalized after 1952) there really isn't any way to "declare war" on anyone anymore... vis-a-vis treaty law (Intl Law). That only allowed military force in self-defense or in support of a UNSC resolution, and;
(2)That's all pretty much BS if the nation initiating the use of force can claim any sort of justification under pretty much any treaty or bilateral agreement and they don't even need that if they have an extant claim on the contested territory and *they don't even need that* if they are a UNSC P5 nation or have one firmly on their side.

The OLD way, sure, seizing the property of another sovereign state uncompensated *is* an act of war.

Even in the last century, such has been a common cause for interventions and blockades/embargoes (to pick well-known U.S.A. cases: 1920's~30's Nicaragua; 1960's~present Cuba)... but...

This case is *so* outrageous, and about so much money, and so damaging to Spain itself that if I were working the UKFCO right now I'd be out for a really nice dinner with the Spanish Foreign Minister conveying a joint support and interoperablity offer and the promise of a UNSC veto if Argentina so much as dares to complain, in return for a Spanish declaration of counterblockade and re-asserting recognition of the Falklands as British... and I'd just keep that whole Gibraltar subject off the table... time for pragmatism and all that.

You are right about the bad timing. Insane levels of unemployment right now in Spain, and the regions of the Kingdom have just been "asked" by the central government to lock in austerity programs in local spending to match the national cuts.

I'd read the eventual outcome as sanctions, EU sanctions, financial market closures, and at worse a port-of-destination embargo (Spanish ports refusing to unload Argentine cargoes)... and an Argentine fold. In the case of Argies being Argies, though (stubborn to a fault), that might not happen. Then a real blockade can't be ruled out and the Spanish do have some limited expeditionary capability and (as discussed above) some 'friends' with mutual interests.

There is also the Pride issue, on both sides, frankly. That hasn't been too obvious in Spanish international affairs recently, but the have been willing to exchange shots with Morocco over the ownership of some rocks in the last decade.

It is going to be a rough go, however this plays out.