The Nationalizations Begin: Argentina Takes Over Oil And Gas Producer YPF

Tyler Durden's picture

Update 2: SPAIN SEES FIRMS' INTERESTS AS NATIONAL INTEREST, OFFICIAL SAYS; SPAIN ANALYZING RESPONSE TO ARGENTINA OVER YPF, OFFICIAL SAYS. Oops.

Update: TRADING HALT: YPF (NYSE)-NEWS DISSEMINATION. Translation: YPF shareholders - you have been Corzined. The money has vaporized. Jon Corzine has been appointed to the newly formed Argentina based Board of Dictators. Have a nice day

There are those who naively believe that any time the tables turn against a government, that government will quietly sit in the corner and play by the rules as its power erodes to zero. Probably the best example of just this is Executive Order 6102 when FDR, in a country that supposedly honors contract laws, issued Executive Order 6102, which effectively nationalized all private gold, no questions asked. And while we may not be there just yet, we are getting close, as demonstrated by the most recent developments in Argentina, where president Cristina Kirchner asked Congress to "expropriate" oil and gas producer YPF (which is majority owned by Repsol YPF) thereby "allowing the government to share ownership of the company with oil-producing provinces, a spokeswoman for Ms. Kirchner said Monday." What is the pretext for this move formerly associated almost exclusively with lawless, "communist" third world banana republics? Why "hydrocarbon self-sufficiency" of course. How soon until any and every government follows suit in a world in which excess liquidity sloshing around makes expropriation of vital energy producing assets a key prerogative? And how long until the resultant (accelerating) collapse in faith of the monetary system, leads government to declare "monetary self-sufficiency" and confiscate everything that is not nailed down. In exchange for worthless pieces of paper of course. Just to make it "fair". And just to return the favor, the market just sent Argentina CDS up by 60 bps, to just shy of 1000 bps. You know, because it's only "fair."

More on this sad development from the WSJ:

The mismatch in Argentina between rapidly growing energy consumption and languishing oil production after a decade of accelerated economic growth appears to be spurring the country's increasingly aggressive stance on YPF. Consumption of oil and gas increased 38% and 25%, respectively, from 2003 to 2010, but oil and gas production decreased 12% and 2.3% in that period, according to Barclays Capital.

 

Argentina has had to rely increasingly on costly imports. The energy trade balance swung from a surplus of about $2 billion in 2010 to a deficit of about $3 billion in 2011. Making matters worse, Argentina is increasingly strapped for dollars to pay for energy imports, as it has been coping with a wave of capital flight.

 

Mrs. Kirchner blames years of declining oil and gas output on companies that she says haven't invested enough. Following her cue, provincial governments in recent weeks have rescinded more than a dozen of YPF's production concessions and unleashed a wave of vitriol against the company.

 

But critics and industry officials say government policies such as high taxes, price caps on home energy rates and unpredictable rule changes like a suspension of tax breaks on production spending have discouraged investment.

Needless to say, it is all YPF's fault it is being nationalized. As for will determine the value of equitable compensation?

The bill calls for YPF's shareholders to be compensated at a value to be determined by a federal tribunal.

Not just a tribunal, but a tribunal which promises to deliver a fair and equitable transfer of monetary equivalents to those saying goodbye to their real assets.

Incidentally, nationalization always and without fail, lead to a collapse in efficiency, productivity and output. We can't wait to see as more and more commodity producers are "expropriated" only to see their outputs plunge, in the process sending the price of whatever commodities are currently in circulation and/or warehoused through the roof, thus leaving the expropriators far worse off than if they done nothing.

Finally, here are the Repsol YPF shareholders who will be less than delighted with this harbinger of what is to come.

All we can say about the big Spanish bank holders: nothing like being kicked when you are down.

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Global Hunter's picture

"desire other peoples profitable enterprises/assets and so literally steal it"...most of those profitable enterprises/assets were stolen in the first place with the complicity of government, the cycle continues.  The solution is in your ZH name.

LawsofPhysics's picture

Well, yes, if you ignore all the other cycles of theft (facilitated by the government) that have already occured.  For someone who claims that moniker, you better do a little more homework.  Now take that foot out of your mouth.  long black markets and local thugs.

GeneMarchbanks's picture

Not sure I'm clever enough to decipher your heavy intellectualism but it seems you've lead me to full enlightenment: Private = Good, Government = Bad.

Wisdom for the ages, Thanks.

AnAnonymous's picture

Well, bad is good and good is bad as the King ran a private government. To what US citizens opposed a republic, that is a public government.

But hey, never stop US citizenism.

TheFourthStooge-ing's picture

AnAnonymous said:

Well, bad is good and good is bad as the King ran a private government. To what US citizens opposed a republic, that is a public government.

But hey, never stop US citizenism.

You sure seem to place a lot of faith and confidence in US citizenism.

One wonders why...

 

akak's picture

No, you merely troll.

That is, when you are not shitting on the side of a Chinese road.

LFMayor's picture

I wish AA would tell us what he "observed" when the chins blew away that MI6 Brit and started the manhunt for that ostentatious son gone bad of that big wig party boss.

Didn't see too much of him last week, did we?

akak's picture

Didn't see too much of him last week, did we?

So many non-Chinese online forums to troll, so little time ....

Dr. Acula's picture

"whatever politicians/Govt touch/manage turns to crap ...give it a few years and productivity and efficiency will tank"

I don't agree.

The market already works to eliminate profit everywhere. (E.g. the theoretical equillibrium in economics is an "evenly rotating economy" where there is no possible opportunity to improve and no profit to be had.)

Without market disciplines, what the government touches will turn into crap - becoming an engine of wealth destruction - within mere days.

 

Seize Mars's picture

I'm not sure about that. Profits should exist, as the indicator that you are delivering what customers actually want.

Unless you are operating in the...shall we say... non-Von Mises world of "economics."

Zero Govt's picture

Dr Acula  -  profits (surplus productivity) have been made for thousands of years, otherwise we'd still be in a cave chumping beatroot

I don't know where you get your "theoretical equillibrium in economics" but i'm presuming some academics backside!

where we don't make a profit is in Govt and monopoly enterprises both of which ultimately go bankrupt once they run out of profitable people to suck off

we at least agree Govt is an engine of wealth destruction

sooner we bin that rotten institution the better (and sooner the green shoots of recovery/profitability)

Seize Mars's picture

After having expropriated a bunch of petroleum companies, didn't Mr. Chavez suddenly become...sick?

Think for yourself's picture

more specifically, he became putsched

Bam_Man's picture

The real question to be asking is:

"How much longer until oil exporters no longer accept other nations' fiat confetti as payment?"

MunX's picture

They get more than fiat confetti, they get F-16's. We get oil priced in USD's, they get Raytheon products.

hedgeless_horseman's picture

 

 

We get oil priced in USD's, they a smaller and smaller percentage of their population get Raytheon products to live well.

MunX's picture

I don't see the difference.

blu's picture

I can easily see a day coming when the "governments" of most of these developing nations consist of little more than mobilized armies that run all over the place confiscating things to exchange for more weapons. Until they eventually kill everyone and exchange everything, and go silent. Just massive cemeteries where entire countries used to be.

Imperialism of another sort. Malthusian imperialism, in fact. A cult of death for profit at the end of the world. If I can see it then everyone else can.

LFMayor's picture

You looking for a rig, a rig big enough to haul that tanker?

Catullus's picture

They nationalize the assets only to privatize them later by "selling" the assets. What a joke.

the grateful unemployed's picture

They nationalize the assets only to privatize them later by "selling" the assets to their rich friends

TNTARG's picture

You know nothing.

Too bad.

Your brains have been washed up.

akak's picture

Says the kneejerk statist defender of an increasingly out-of-control, quasi-fascist regime.

You disgust me, as does every spineless, submissive pro-authoritarian Quisling like you.  You are not a human being, you are a lemming.

Zero Govt's picture

they'll be next to worthless after politicians have 'managed' the business for a few years 

AurorusBorealus's picture

The simple fact of the matter is that government, of some form, is necessary and that government needs financed.  Throughout history, many governments have operated revenue-generating industries to supplement tax income (one need think only of the relationship, through the years, between the English Crown and the British East India Company).

Oil, gas, and coal are obvious and natural industries for government to operate to generate revenue (since oil and gas are under the ground of the "people" and not easily accounted for in any standard property law).  If the choice is between taxation and government operating a revenue-generating industry crucial to everyone, I would prefer that government operate an industry.  Of course, with modern mobocracy-fascist debtor nations, this is unlikely to sate the state's voracious appetite for resources.

Zero Govt's picture

"The simple fact of the matter is that government, of some form, is necessary.."

Ok, what is Govt good at?

You have 3,000 years of history and 300 countries to find something, anything, this rotten to the core institution can actually manage ...go on, find something

crawldaddy's picture

is your ass currently sitting in a chair in a safe environment, Is the air you breathing toxic? is the food you eating poison?  I love hearing a bunch of fat whiney pansy asses cry about, but what has it done for me.

TheFourthStooge-ing's picture

.

is your ass currently sitting in a chair in a safe environment, Is the air you breathing toxic? is the food you eating poison?

You just keep believing that. The government exists to protect your interests. The USDA is run by Monsanto, but it's for the good of everyone. Hillary Clinton gave her personal OK for food from Japan, so there's no need to run it past a geiger counter. She's looking out for you.

http://www.youtube.com/watch?v=2NQIPVqLMUg

 

Non Passaran's picture

What a bunch of bullshit.

Isn't it enough to simply say that he is wrong? Instead we need to be informed of at least two new conspiracy theories. No wonder people laugh at your comments.

LFMayor's picture

so, you don't believe in conspiracy theories?  Contrails from the HAARP will see to you, naysayer.  /sarc off

machineh's picture

So government invented the chair?

Oh wait, you're right -- the ELECTRIC CHAIR. Bwa ha ha ,.,

Chump's picture

Well, if this post is indicative we can cross "education" off the list of "Things Government Does Well."

trembo slice's picture

Yes.  Good thing the government keeps the atmosphere in check.  Otherwise it would just leave the Earth and we'd all be fucked.  Thank God the FDA exist to help me decide whether or not food is edible.  Are you shitting me? 

I love hearing a bunch of pro-statists, simple-minded peons acting like government, not water, is the key to sustaining complex organisms on this planet.  If it weren't for government, the water would have evaporated by now too...

crawldaddy's picture

no just poisoned worse than it already is genius.

akak's picture

Governments have been throughout history by FAR the worst polluters --- from the Roman mercury mines of Almaden in Spain to the US Army and Air Force's numerous and vast toxic dumps on military bases around the world.

Killing the inane arguments of brainwashed statists: like shooting fish in a barrel!

trembo slice's picture

Damn!  Who knew socio-economic and environmental issues were so easy to resolve.  Just place anything and everything under governmental jurisdiction and they wave their magic wand over that shit and it's all good.

Global Hunter's picture

I eat healthy and am safe DESPITE government and its corrupt thuggish aparatchiks

Cathartes Aura's picture

.

Is the air you breathing toxic? is the food you eating poison?

why yes, it is actually, thank you for asking.

GMO Toxicity: Bt Toxin Kills Human Kidney Cells

 

“Why in the World are They Spraying?” is an investigative documentary into one of the many agendas associated with chemtrail/geoengineering programs, “weather control”.

http://www.whyangels.info/

 

Controversy Should Not Stop Us From Developing Memory-Erasing Drugs, Neuroethicist Argues

 

of course, if you live in a parallel reality called DeNial, I'm sure you and yours are healthy, wealthy, and wise. . . eternal sunshine, spotless mind. . .

boogerbently's picture

Didn't I hear this question about Rome in "The Life of Brian" ?

Dr. Acula's picture

>what is Govt good at?

Governments are better than the free market at providing security services.

Especially when they're securing people in ovens.

 

AurorusBorealus's picture

Well, at its most fundamental level, the purpose of government is to resolve disputes between individuals or groups over property and person.  It is preferable to have government as opposed to tribal vendettas.  Like it or not, government is a necessary evil of civilization.  The alternative is barbarism.