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.

Getty
Show Hide image

Why the Liberal Democrats by-election surge is not all it seems

The Lib Dems chalked up impressive results in Stoke and Copeland. But just how much of a fight back is it?

By the now conventional post-Brexit logic, Stoke and Copeland ought to have been uniquely inhospitable for the Lib Dems. 

The party lost its deposit in both seats in 2015, and has no representation on either council. So too were the referendum odds stacked against it: in Stoke, the so-called Brexit capital of Britain, 70 per cent of voters backed Leave last June, as did 62 per cent in Copeland. And, as Stephen has written before, the Lib Dems’ mini-revival has so far been most pronounced in affluent, Conservative-leaning areas which swung for remain. 

So what explains the modest – but impressive – surges in their vote share in yesterday’s contests? In Stoke, where they finished fifth in 2015, the party won 9.8 per cent of the vote, up 5.7 percentage points. They also more than doubled their vote share in Copeland, where they beat Ukip for third with 7.3 per cent share of the vote.

The Brexit explanation is a tempting and not entirely invalid one. Each seat’s not insignificant pro-EU minority was more or less ignored by most of the national media, for whom the existence of remainers in what we’re now obliged to call “left-behind Britain” is often a nuance too far. With the Prime Minister Theresa May pushing for a hard Brexit and Labour leader Jeremy Corbyn waving it through, Lib Dem leader Tim Farron has made the pro-EU narrative his own. As was the case for Charles Kennedy in the Iraq War years, this confers upon the Lib Dems a status and platform they were denied as the junior partners in coalition. 

While their stance on Europe is slowly but surely helping the Lib Dems rebuild their pre-2015 demographic core - students, graduates and middle-class professionals employed in the public sector – last night’s results, particularly in Stoke, also give them reason for mild disappointment. 

In Stoke, campaign staffers privately predicted they might manage to beat Ukip for second or third place. The party ran a full campaign for the first time in several years, and canvassing returns suggested significant numbers of Labour voters, mainly public sector workers disenchanted with Corbyn’s stance on Europe, were set to vote Lib Dem. Nor were they intimidated by the Brexit factor: recent council by-elections in Sunderland and Rotheram, which both voted decisively to leave, saw the Lib Dems win seats for the first time on massive swings. 

So it could well be argued that their candidate, local cardiologist Zulfiqar Ali, ought to have done better. Staffordshire University’s campus, which Tim Farron visited as part of a voter registration drive, falls within the seat’s boundaries. Ali, unlike his Labour competitor Gareth Snell and Ukip leader Paul Nuttall, didn’t have his campaign derailed or disrupted by negative media attention. Unlike the Tory candidate Jack Brereton, he had the benefit of being older than 25. And, like 15 per cent of the electorate, he is of Kashmiri origin.  

In public and in private, Lib Dems say the fact that Stoke was a two-horse race between Labour and Ukip ultimately worked to their disadvantage. The prospect of Nuttall as their MP may well have been enough to convince a good number of the Labour waverers mentioned earlier to back Snell. 

With his party hovering at around 10 per cent in national polls, last night’s results give Farron cause for optimism – especially after their near-wipeout in 2015. But it’s easy to forget the bigger picture in all of this. The party have chalked up a string of impressive parliamentary by-election results – second in Witney, a spectacular win in Richmond Park, third in Sleaford and Copeland, and a strong fourth in Stoke. 

However, most of these results represent a reversion to, or indeed an underperformance compared to, the party’s pre-2015 norm. With the notable exception of Richmond’s Sarah Olney, who only joined the Lib Dems after the last general election, these candidates haven’t - or the Lib Dem vote - come from nowhere. Zulfiqar Ali previously sat on the council in Stoke and had fought the seat before, and Witney’s Liz Leffman and Sleaford’s Ross Pepper are both popular local councillors. And for all the excited commentary about Richmond, it was, of course, held by the Lib Dems for 13 years before Zac Goldsmith won it for the Tories in 2010. 

The EU referendum may have given the Lib Dems a new lease of life, but, as their #LibDemFightback trope suggests, they’re best understood as a revanchist, and not insurgent, force. Much has been said about Brexit realigning our politics, but, for now at least, the party’s new normal is looking quite a lot like the old one.