Argentina to Seize Control of Oil Company

Argentina’s president, Cristina Fernández de Kirchner, announced on Monday that the government would seize a majority stake in YPF, the nation’s largest oil company.

The expropriation would reassert state control over an important pillar of Argentina’s economy, but it has already increased diplomatic tensions with Spain and the European Union. Mrs. Kirchner quickly ousted Sebastián Eskenazi as YPF’s chief executive, naming two top aides, Julio de Vido and Axel Kicillof, to run the company.

Under Mrs. Kirchner’s plan, which she announced on national television, Argentina’s government would take a 51 percent controlling stake in YPF, which is now majority-owned by a Spanish energy company, Repsol YPF. Of that new stake, Argentina’s central government would get 51 percent and the country’s provinces 49 percent. The plan is part of a bill submitted to Argentina’s Congress that is widely expected to be approved.

The Spanish government repeated its earlier pledge to retaliate, though it did not specify how. Following an emergency cabinet meeting in Madrid on Monday evening, José Manuel García Margallo, the Spanish foreign minister, said that Madrid “condemned with the utmost energy” Argentina’s move, adding that it “broke the climate of cordiality and friendship that presided over relations between Spain and Argentina.” The European Union also criticized the plan.

Repsol owns 57 percent of YPF and said Monday that it would study “all legal options available”  to defend its interests and those of shareholders against a forced sale. It was not immediately clear how YPF’s shareholders, which include Argentina’s Eskenazi family, would be affected by the takeover. A tribunal would determine how much compensation that Repsol and other shareholders would receive for their YPF shares.

YPF’s shares have fallen in recent days as investors considered the likelihood of a government takeover. Its stock plunged again on Monday after Mrs. Kirchner delivered her remarks and was down about 11 percent when trading was halted. The current stock-market value of the entire company is about $7.7 billion.

Mrs. Kirchner said that the expropriation of YPF, a company founded by Argentina’s government in the 1920s and privatized in the 1990s, was a “recovery of sovereignty and control.” She said the move would allow Argentina to raise production, after the country recently became an energy importer.

For months, the central government and provincial officials have pressured YPF to raise its investments in Argentine production. The government’s tactics had included revoking concessions for coveted fields.

Antonio Brufau, the chief executive of Repsol, Spain’s largest company, had been trying for days to meet personally in Buenos Aires with Mrs. Kirchner but was rebuffed.

Seizing YPF appears to be a popular move in Argentina, where caps on residential energy prices and a growing economy have helped push energy demand to new highs. Argentina’s oil production has declined in the last decade as regulatory uncertainty persisted over price caps and the policies over profit remittances. Many Argentines still resent the privatization of state-owned companies in the 1990s, so taking on YPF gives Mrs. Kirchner the opportunity to go after a symbol of that time.

“This is Malvinas two,” said Federico Thomsen, an independent economist in Buenos Aires, referring to Argentina’s claims of sovereignty over the Falkland Islands, which are controlled by Britain and called the Malvinas in Spanish. “Everything that was done in the 1990s is viewed with suspicion. For most people, it is easier to blame the decline in oil and gas production on YPF than on the government’s policies and low prices.”

Mrs. Kirchner has already nationalized Argentine Airlines and pension funds, while also pressuring companies here to repatriate export proceeds in an effort to slow capital flight. Seizing control of YPF sends a new signal about Argentina’s policies toward foreign investment, especially in the energy sector.

Huge discoveries of shale oil resources were made in the last year in Argentina. The French oil giant Total and the American companies Exxon Mobil and Apache are among those making investments in Argentine shale fields.