EU, Argentina Oil Company Row Gains Steam

2 May 2012

Harsh words continue to fly between the EU and Argentina following Buenos Aires' nationalisation of Spanish-owned oil and gas company Repsol YPF, as the legislation associated with the takeover makes its way through the Argentine Congress. Meanwhile, in Geneva, Argentina's import policies have again come under fire at the WTO, with several members - including the US, EU, and Japan - criticising Buenos Aires' licensing process and requirements at a meeting last Friday.

Argentine foreign minister: De Gucht's comments ‘unacceptable'

European Trade Commissioner Karel De Gucht's recent comments about Argentina's commercial policy were "unacceptable," Argentine Foreign Minister Héctor Timerman said last Thursday in response to a communiqué sent the previous week by the EU trade chief that criticised the YPF takeover and Argentina's import measures.

"Your comments over Repsol YPF have surprised me both for their focus as well as for their tone. The reaction is disproportionate and the focus deserves a much more detailed analysis," he said.

Responding to De Gucht's concerns regarding the impact of Buenos Aires' commercial policies on its trade and investment relations with Brussels, Timerman stressed that the Repsol takeover is instead geared toward "generating a more predictable economic environment, in favouring the consolidation of the country's growth without the fear that future energy restrictions could limit our economy's expansion."

"Argentina fulfils its international obligations and the trade policies it adopts are transparent and consistent with the norms and commitments made at the World Trade Organization," Timerman added.

Tensions have been running high between the 27-member EU bloc and the South American country following Argentine President Cristina Fernández de Kirchner's announcement in mid-April that her government would be expropriating Repsol YPF.

At the time, Kirchner argued that the Spanish-owned company had not sufficiently invested in new oil production and had, in turn, caused Argentina to have to become an energy importer. (See Bridges Weekly, 18 April 2012)

The legislation was recently approved in the Argentine Senate by a wide margin, and will move next to the Argentine Chamber of Deputies, which is expected to sign off on it on 3 May.

The announcement, while popular in Argentina, sparked outcry from Spanish and European officials and concern by various countries over the investment climate in the South American country, along with prompting threats from Madrid that it would respond in the areas of trade, energy, and diplomacy.

Along with De Gucht's letter, EU officials also cancelled a bilateral meeting with Argentine officials that was meant to discuss trade and economic issues, a move that was followed shortly thereafter by the European Parliament's approval of a non-legislative resolution asking the European Commission to consider partially suspending preferential trade treatment for Argentine exports.

At the time, MEPs also urged the Commission to use "all appropriate dispute settlement tools available at the WTO and G-20" to respond to the move. (See Bridges Weekly, 25 April 2012)

De Gucht has since said that Brussels is looking at "all tools at our disposal to give an effective response," telling a European Parliament committee that Argentina's decision is both damaging to Spain and the EU as a whole, as well as to the "future prosperity" of the Argentinean people.

Spanish biodiesel decision ‘unacceptable discrimination,' Timerman says

In the same letter, the Argentine foreign minister also criticised Spain's recent decision to effectively curtail imports of Argentine biodiesel. The move "represents an unacceptable discrimination which, if it is not corrected by the EU, affects half of our exports to Spain or 10 percent of our total exports to the EU," he said.

Madrid announced on 20 April that it would be offering incentives to prioritise the use of Spanish and EU biodiesel in response to Buenos Aires' expropriation of Repsol YPF, a move that may in turn reduce imports of biodiesel from Argentina - the world's leading supplier of soyoil and soy-based biodiesel.

Spanish biodiesel imports from Argentina amounted to 750 million euros in 2011, according to government statistics and Spain's Renewable Energy Producers Association (APPA, by its acronym in Spanish). (See Bridges Weekly, 25 April 2012)

Spanish officials have also said that Argentina's takeover of Repsol YPF could impact the ongoing trade talks between the EU and South American customs union Mercosur, of which Argentina is a member, which have already hit multiple snags in their thirteen-year run.

According to comments made by Spanish Foreign Minister José Manuel García-Margallo, the EU is currently considering whether to move forward with preferential agreements with the four-country bloc - which also includes Brazil, Uruguay, and Paraguay - "if Argentina does not respect the rules."

Import policies criticised at WTO committee

Argentina's import policies, which were also addressed in De Gucht's letter, again came under fire at the WTO last Friday as a group of over a dozen members expressed concern over the impact of such measures on their producers and traders at a meeting of the global trade body's Import Licensing Committee.

Referring to the complaint raised by several members at the 30 March meeting of the Council on Trade in Goods, they asked that Buenos Aires explain in detail and in writing how its import licensing measures - which some members reportedly described as "protectionist" - correspond with Argentina's WTO obligations.

Among other concerns, the members called into question whether Argentina - as a member of the Group of 20 leading economies - was living up to the group's declarations against rising protectionism, and argued that the licensing is more burdensome than necessary and takes longer than the 30-60 day maximum for non-automatic licenses set out in WTO rules.

In response, Buenos Aires said that, while it would not repeat the answer given at the Goods Council in March, its measures were indeed WTO-compatible. The South American country also stressed that statements made outside the global trade body, such as in the G-20 context, should not be raised at the WTO.

The members raising questions about Argentina's policies included Australia, Canada, Chinese Taipei, Colombia, Costa Rica, the EU, Japan, Korea, New Zealand, Norway, Peru, Switzerland,  Thailand, Turkey, and the US, who together argued that the measures were leading to exports to Argentina being either delayed or declined entirely.

ICTSD reporting; "Spain says Argentina could hinder EU-Mercosur free-trade talks over hostile Repsol takeover," ASSOCIATED PRESS, 27 April 2012; "EU reaction to YPF takeover ‘unacceptable,'" AFP, 27 April 2012; "Argentina Calls EU Trade Commissioner Comments ‘Unacceptable'," WALL STREET JOURNAL, 26 April 2012.

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