The fallout from the YPF seizure

The players are taking sides as Argentina consolidates the ground it has taken

The fallout from Argentina's seizure of 51 per cent of its former state oil company YPF continues today, both in diplomatic and financial sectors.

The most immediate impact is that a deal to sell the company has fallen through. The Financial Times reports that Repsol, the Spanish company that held 57 per cent of YPF, was negotiating a deal to sell the company to the Chinese firm Sinopec. Now that Repsol owns 6, rather than 57, per cent of the company, that deal is obviously unlikely to go through.

The sale was being negotiated in secret, according to the FT's sources, because the firms hoped to present it to the Argentine government in its finalised state. The government holds a golden share in YPF, which means that any sales have to be approved by it.

To what extent Argentina will feel concerned about this is debatable. On the one hand, they nationalised the company without knowing all the details, but on the other, even if the takeover had gone ahead, it seems unlikely it would have changed the state's rationale for action. Repsol was already investing more into YPF than it was getting from it, and there is no reason to believe that Sinopec would have behaved differently.

The impact of the move on Repsol itself has been a 6 per cent overnight fall in its share price, but where it goes from here depends on how many concessions it manages to extract from Argentina. The company is demanding $10bn compensation for the move, but the government seems unlikely to fork it over, with the deputy economic minsiter saying:

We are going to determine [YPF’s] real value. We are not going to pay what [Repsol] say.

Unless Argentina volunteers to enter arbitration, as Repsol is demanding, the real action looks to be diplomatic. Surprising nobody, Britain has entered the debate on the side of Spain. William Hague criticised the move, saying:

This is the latest in a series of trade and investment related actions taken by Argentina which are damaging to business interests, and will undermine Argentina’s economy. We will work with Spain and our EU partners to ensure the Argentine authorities uphold their international commitments.

The Spanish foreign minister, José Manuel García-Margallo, hinted at further problems which Argentina could face as a result, telling El Pais:

In my opinion Argentina has shot itself in the foot. Argentina needs 36 billion euros in funding and it could see itself cut off from credit by international investors after this measure.

An editorial in the paper is similarly damning, writing:

The fact of the expropriation, threatened for months with the intention of undermining Repsol’s resistance and cheapening YPF’s shares, goes beyond a mere breakdown of the legal security one expects in a democratic country; it is an intentional betrayal of the agreement on reciprocal protection of investments signed by Spain and Argentina in November 1991, and initiates a period of grave uncertainty for Spanish companies in Argentina, and for all foreign investors there.

But the dissenting voices have started to come out of the woodwork. In the Guardian, Mark Weisbrot writes that Argentina has made the correct decision:

Now the government is reversing another failed neoliberal policy of the 1990s: the privatisation of its oil and gas industry, which should never have happened in the first place.

There are sound reasons for this move, and the government will most likely be proved right once again. Repsol, the Spanish oil company that currently owns 57% of Argentina's YPF, hasn't produced enough to keep up with Argentina's rapidly growing economy. From 2004 to 2011, Argentina's oil production has actually declined by almost 20% and gas by 13%, with YPF accounting for much of this. And the company's proven reserves of oil and gas have also fallen substantially over the past few years.

Weisbrot seems likely to stay in the minority, however. Given the disastrous effects of price controls on oil, the massaging of inflation figures (thought to be at 18-20 per cent, rather than the official 9-10 per cent) and the aforementined high investment by Repsol into YPF, Argentina is hardly a paragon of economic rationality.

A woman jogs past a sign referencing YPF in Argentina. Credit: Getty

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Trade unions must change or face permanent decline

Union membership will fall below one in five employees by 2030 unless current trends are reversed. 

The future should be full of potential for trade unions. Four in five people in Great Britain think that trade unions are “essential” to protect workers’ interests. Public concerns about low pay have soared to record levels over recent years. And, after almost disappearing from view, there is now a resurgent debate about the quality and dignity of work in today’s Britain.

Yet, as things stand, none of these currents are likely to reverse long-term decline. Membership has fallen by almost half since the late 1970s and at the same time the number of people in work has risen by a quarter. Unions are heavily skewed towards the public sector, older workers and middle-to-high earners. Overall, membership is now just under 25 per cent of all employees, however in the private sector it falls to 14 per cent nationally and 10 per cent in London. Less than 1 in 10 of the lowest paid are members. Across large swathes of our economy unions are near invisible.

The reasons are complex and deep-rooted — sweeping industrial change, anti-union legislation, shifts in social attitudes and the rise of precarious work to name a few — but the upshot is plain to see. Looking at the past 15 years, membership has fallen from 30 per cent in 2000 to 25 per cent in 2015. As the TUC have said, we are now into a 2nd generation of “never members”, millions of young people are entering the jobs market without even a passing thought about joining a union. Above all, demographics are taking their toll: baby boomers are retiring; millennials aren’t signing up.

This is a structural problem for the union movement because if fewer young workers join then it’s a rock-solid bet that fewer of their peers will sign-up in later life — setting in train a further wave of decline in membership figures in the decades ahead. As older workers, who came of age in the 1970s when trade unions were at their most dominant, retire and are replaced with fewer newcomers, union membership will fall. The question is: by how much?

The chart below sets out our analysis of trends in membership over the 20 years for which detailed membership data is available (the thick lines) and a fifteen year projection period (the dotted lines). The filled-in dots show where membership is today and the white-filled dots show our projection for 2030. Those born in the 1950s were the last cohort to see similar membership rates to their predecessors.

 

Our projections (the white-filled dots) are based on the assumption that changes in membership in the coming years simply track the path that previous cohorts took at the same age. For example, the cohort born in the late 1980s saw a 50 per cent increase in union membership as they moved from their early to late twenties. We have assumed that the same percentage increase in membership will occur over the coming decade among those born in the late 1990s.

This may turn out to be a highly optimistic assumption. Further fragmentation in the nature of work or prolonged austerity, for example, could curtail the familiar big rise in membership rates as people pass through their twenties. Against this, it could be argued that a greater proportion of young people spending longer in education might simply be delaying the age at which union membership rises, resulting in sharper growth among those in their late twenties in the future. However, to date this simply hasn’t happened. Membership rates for those in their late twenties have fallen steadily: they stand at 19 per cent among today’s 26–30 year olds compared to 23 per cent a decade ago, and 29 per cent two decades ago.

All told our overall projection is that just under 20 per cent of employees will be in a union by 2030. Think of this as a rough indication of where the union movement will be in 15 years’ time if history repeats itself. To be clear, this doesn’t signify union membership suddenly going over a cliff; it just points to steady, continual decline. If accurate, it would mean that by 2030 the share of trade unionists would have fallen by a third since the turn of the century.

Let’s hope that this outlook brings home the urgency of acting to address this generational challenge. It should spark far-reaching debate about what the next chapter of pro-worker organisation should look like. Some of this thinking is starting to happen inside our own union movement. But it needs to come from outside of the union world too: there is likely to be a need for a more diverse set of institutions experimenting with new ways of supporting those in exposed parts of the workforce. There’s no shortage of examples from the US — a country whose union movement faces an even more acute challenge than ours — of how to innovate on behalf of workers.

It’s not written in the stars that these gloomy projections will come to pass. They are there to be acted on. But if the voices of union conservatism prevail — and the offer to millennials is more of the same — no-one should be at all surprised about where this ends up.

This post originally appeared on Gavin Kelly's blog