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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To preserve the environment we hold in common, everyone has to play their part

The challenge of building a clean future based on the common good of Londoners demands that politicians, business, communities and individuals each take a share of the responsibility and of the benefits.

The environmental challenge facing our capital city can seem overwhelming. Our air is poisonous. Our infrastructure built for the fossil fuel era. The need to build a clean, low carbon future can seem incompatible with competing challenges such as protecting energy security, housing and jobs.

The way we tackle this challenge will say a lot about the type of city we are. We inherit the world we live in from the generations that went before us, and only hold it until it is time to hand it over to future generations. The type of environment we leave behind for our children and grandchildren will be affected by the decisions we need to take in the short term. Our shared inheritance must be shaped by all of us in London.

Londoners currently face some crucial decisions about the way we power our city. The majority of us don't want London to be run on dirty fuel, and instead hope to see a transition to a clean energy supply. Many want to see that clean energy sourced from within London itself. This is an appealing vision: there are upsides in terms of costs, security and, crucially, the environment.

Yet the debate about how London could achieve such a future has remained limited in its scope. Air pollution has rightly dominated the environmental debate in this year’s mayoral election, but there is a small and growing call for more renewable deployment in the city.

When it comes to cities, by far the most accessible, useable renewable energy is solar, given you can install it on some part of almost every roof. Rooftop solar gives power to the householder, the business user, the public servant - anyone with a roof over their head.  And London has upwards of one million roofs. Yet it also has the lowest deployment of solar of any UK city. London can do better. 

The new mayor should take this seriously. Their leadership will be vital to achieving the transition to clean energy. The commitments of the mayoral frontrunners should spur other parts of society to act too. Zac Goldsmith has committed to a tenfold increase in the use of solar by 2025, and Sadiq Khan has pledged to implement a solar strategy that will make the most of the city’s roofs, public buildings and land owned by Transport for London.

While the next mayor will already have access to some of the tools necessary to enact these pledges (such as the London Plan, the Greater London Assembly and TfL), Londoner’s must also play their part. We must realise that to tackle this issue at the scale and speed required the only way forward is an approach where everyone is contributing.

A transition to solar energy is in the best interests of citizens, householders, businesses and employees, who can begin to take greater control of their energy.  By working together, Londoners could follow the example of Zurich, and commit to be a 2,000 watt society by 2050. This commitment both maximizes the potential of solar and manages introduces schemes to effectively manage energy demand, ensuring the city can collectively face an uncertain future with confidence.

Unfortunately, national policy is no longer sufficient to incentivise solar deployment at the scale that London requires. There is therefore an important role for the incoming Mayor in facilitating and coordinating activity. Whether it is through TfL, existing community energy schemes, or through individuals, there is much the mayor can do to drive solar which will benefit every other city-dweller and make London a cleaner and healthier place to live.

For example the new mayor should work with residents and landlords of private and social housing to encourage the deployment of solar for those who don’t own their property. He should fill the gap left by national building standards by ensuring that solar deployment is maximized on new build housing and commercial space. He can work with the operator of the electricity grid in the capital to maximize the potential of solar and find innovative ways of integrating it into the city’s power demand.

To bring this all together London should follow the example set by Nottingham and Bristol and create it’s own energy company. As a non-profit company this could supply gas and electricity to Londoners at competitive prices but also start to drive the deployment of clean energy by providing an attractive market for the power that is generated in the city. Community schemes, businesses and householders would be able to sell their power at a price that really stacks up and Londoners would receive clean energy at competitive prices.

The challenge of building a clean future based on the common good of Londoners demands that politicians, business, communities and individuals each take a share of the responsibility and of the benefits. Lets hope the incoming Mayor sees it as their role to convene citizens around this aim, and create incentives to virtue that encourage the take up and deployment of solar, so that we have a healthy, clean and secure city to pass on to the next generation.