April 26, 2012 / 4:47 AM / 8 years ago

UPDATE 2-Argentine Senate backs YPF nationalization

 * Polls show most Argentines favor the expropriation
 * Spain, in reprisal, halts imports of Argentine biodiesel

 (Recasts, adds context, background, byline)	
 By Hugh Bronstein	
 BUENOS AIRES, April 26 (Reuters) - Argentina's proposal to
nationalize the country's biggest oil company sailed through the
Senate by a 63-3 vote on Thursday,  underscoring broad domestic
support for a move that has infuriated foreign investors.	
 The bill aimed at expropriating YPF, a unit of
Spanish energy major Repsol, is expected to be approved
by the lower house next week and become law.	
 President Cristina Fernandez, a popular second-term leader
who controls both houses of Congress, unveiled plans last week
to seize a 51 percent stake in YPF from Repsol.	
 She says the parent company has under-invested and
under-produced in Argentina, a charge that Repsol dismisses.	
 Most Argentines support the move to renationalize YPF,
privatized in the 1990s after 70 years under full state control.
Many blame the privatizations and free-market reforms of that
decade for provoking Argentina's 2001/02 financial meltdown.	
 "The privatization of YPF was one of the worst mistakes of
that era," Senator Miguel Pichetto, a Fernandez ally, said just
before the vote was called.	
 Latin America's No. 3 economy has yet to return to global
credit markets a decade after its crippling 2001/02 sovereign
debt default -- the biggest in history.	
 With memories of this debacle still fresh, many voters have
hailed Fernandez's calls for "energy sovereignty."	
 A survey published last weekend by local polling company
Poliarquia showed 62 percent of respondents agreed with the
expropriation, with 23 percent against it.	
 "The government's bill doesn't reflect a capricious or
random decision," ruling party senator Marcelo Fuentes said
during the marathon debate. "It's a logical result stemming from
the need to reverse free-market thinking in energy policy."	
 The early morning vote, in which four senators abstained, 
was held after a 15-hour debate.    	
 Argentina's trade surplus, a pillar of Fernandez's economic
policy, shrank last year as fuel imports more than doubled -
sending the issue of flagging oil and natural gas production to
the top of the president's list of priorities.	
 Once the takeover becomes law, attention will turn to the
compensation Argentina will pay Repsol for its stake. Officials
have already said it will be far lower than the $9.3 billion the
company has sought.	
 The nationalization has investors and trade partners worried
about increasingly antagonistic policies such as import curbs.	
 Madrid has vowed to halt multimillion-dollar imports of
biodiesel from Argentina in retaliation while ratings agencies
Moody's and S&P said the YPF seizure could heighten Argentina's
economic isolation at a time of slowing growth. 
 Moody's warned that other Argentine energy companies such as
 Pan American Energy, majority owned by BP Plc , and
Petrobras Argentina  now face a higher risk
of government interference in the oil and gas sector.	
 "The expropriation will also have negative credit
implications for a number of Spanish companies with significant
operations in Argentina, including telecommunications group
Telefonica," Moody's said.  	
 Despite criticism from business groups about her
state-centric policies, Fernandez was re-elected in October with
54 percent of the vote. She pledged during that campaign to
deepen the government model pioneered by her late husband and
predecessor as president Nestor Kirchner. 	
 Fernandez, a fiery public speaker sometimes compared to
Argentina's famous first lady Evita Peron, has worn only black
since Kirchner's sudden death in 2010 and she has dedicated
YPF's takeover to his memory.	
 In a speech on Tuesday, Fernandez acknowledged she was
nervous when she announced the YPF takeover plan: "They weren't
nerves caused by doubts or insecurities. On the contrary; I'm
absolutely certain that this is the only way.	
 "What upset me was that he (Kirchner) couldn't be here to
see such a historic moment." 	
 (Editing by David Cowell)	
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