Another Latin American populist follows in Chavez's footsteps
History tells us there is something to be feared of a gifted orator with little in the morality tank but an audience to please. Argentina's Cristina Fernandez de Kirchner is no different
It might be easy to confuse the verbs appropriate - to take, use for one's own without the owner's permission - with expropriate - (esp. of the state) take away (property) from its owner. So the former is theft and the latter describes Argentina's decision to nationalise oil company YPF from Repsol, the latest charm offensive from Sean Penn's super Cougar chum, Cristina Fernàndez de Kirchner.
There is some truth in the saying that Argentinians are Italians who speak Spanish but think they're British. It's a stunning country which, with its strong European heritage, not to mention perceived arrogance in the continent, should be a natural ally. But the Repsol-YPF deal was a progeny of the Menem era. Kirchner's move smacks of spite.
Her government's raid on the former national oil company caused a blip in the markets, an eight percent tic down in Repsol's share price and little else in the global scheme of things.
But with Borders & Southern Petroleum's announcement of a putative massive oil strike off the Falklands - within days of the black widow's larceny - resulting in a 53 percent leap in that oiler's share price, the jury appears to be out on the global consequences of Kirchner's apparently suicidal move to make enemies as a matter of policy.
We shouldn't be surprised, but we should be concerned. Following on from its recent ratcheting up of the Falklands dispute, in March, Buenos Aires warned that it could sue oil companies exploring around the Falklands, as well as those companies offering explorers 'logistical help' or 'financial services'.
At the time Kirchner's threats were treated with contempt in business circles. David Hudd, chairman of FIH, which owns a range of businesses on the Falklands and has a 4.4 percent stake in oil explorer Falkland Oil and Gas, viewed Argentina's posturing as bizarre rather than threatening.
"If FIH received a letter from the Argentine government it would be ignored. I wouldn't deign to waste a stamp on it," he told The Daily Telegraph. "The whole thing is so bizarre and ridiculous that it defies rational comment."
For many on the right, the YPF hijacking is a naked piece of illogical populism which has desperate echoes of the last days of the Galtieri junta and its Falklands adventure.
Kirchner justified her government's shock move thus: “The United Arab Emirates control 100 per cent of their oil and gas industry; the same with China, Iran, Venezuela, Uruguay, Chile, Ecuador, Mexico, Malaysia and Egypt among many others. Colombia holds a 90 per cent stake, Russia’s Gazprom holds a 50 per cent stake [in gas], Brazil [has a 51 per cent government stake] in Petrobras. So this is not something we came up with one day and all of the sudden.”
Well that's fine then. The possible fatal difference is Argentina's broken economy. The inconvenient truth, for those advocating default for the likes of Greece, is laid bare by Argentina's own default in 2001 since when, broke and fiscally hamstrung, it finds the world's credit markets closed, and with the likes of the gruesome Hugo Chavez emerging as a possible sugar daddy, it's fast becoming an economic pariah in the region.
The day Kirchner announced the YPF appropriation, former allies in her Falklands dispute, like Peru, played down the likelihood of policy contagion from Argentina. Mexican president Felipe Calderon went further, “No one in their right mind would invest in a country that expropriates investments,” he told Bloomberg.
The Kirchner economic model relies on price controls, protectionism and consumerism to bolster the internal market, and more recently, tight controls on capital flight. It also offers subsidies to sectors like public transportation, water and energy.
But Argentina also "has a behavioural problem in its relations with the rest of the world that has deteriorated in the last years," according to Emilio Cardenas, who represented Argentina in the United Nations in the 1990s.
And through the WTO, a number of countries, including the United States, Japan, and European and Latin American nations, have all expressed their concern over Argentina's protectionist measures. "The YPF episode is going to increase these complaints," Cardenas told AFP.
Of course the 64 trillion peso question remains if Kirchner wants the investment in YBF necessary to secure increased efficiency where is she going to find it?
Rumour has it that Repsol - which is a major partner with Sinopec in Brazil - was on the verge of spinning off YPF to the Chinese oil major. Kirchner's move skewered the deal leaving Sinopec with the prospect of trying hammer out a deal with the capricious Cristina over assets appropriated from its major partner. Brazil's Petrobras was also rumoured to be in the frame as a potential investor in YPF. Experts believe this is wide of the mark as Petrobras has enough on its plate, so with few friends in the frame, Kirchner's piracy may well prove a fatal disaster.
It is thought Argentina sits on the world's third biggest reserve of shale hydrocarbons which will require as much as $250bn and a decade to develop. Although dealing with rogue governments and the threat of expropriation is part and parcel of the global oil and mining industries, quite why any investor would want to enter into long term project on such a scale with the MILF from Hell is not immediately clear.
Worse, the disconnect between the free market and a country in economic peril is clear to see as those gifted with the power of the people seemingly unravel in their name.
Comparison between Kirchner and that other first lady turned lefty friend of the poor, Eva Peron, are encouraged by La Kirchner and through her long, noteless speeches she can, and does, play to the gallery. Revelling in her mourning garb, her increasing hysteria is held in check only by her alleged high blood pressure. Watch her invective on youtube with your eyes closed, and, to the lingually inept, she is Hitler on Helium.
Of course history tells us there is something to be feared of a gifted orator with little in the morality tank but an audience to please. And turning inward in the way Kirchner seems to be doing is worrying.
Indeed, in a fairly short space of time she's managed to fall out with the US over banking restrictions, the UK over the Falklands, and Spain, much of Europe and arguably China too, over the consequences of YPF expropriation.
On the plus side she's strengthened ties with Chavez. And Sean Penn.
Jonathan Bracey-Gibbon is a freelance journalist who over the past 15 years has written for The Times, the Financial Times, The Sunday Times and Sunday Express
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