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Oil and Trouble

Cristina Kirchner renationalizes an industry.

Apr 30, 2012, Vol. 17, No. 31 • By CHRISTOPHER CALDWELL
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Thirteen years ago, when Repsol took control of YPF, the argument for privatization was that government runs things inefficiently because it does not compete in the marketplace. Fine, but Repsol didn’t do much competing; it controlled over 90 percent of oil production in Argentina. What it did offer was the dependability that used to characterize government industries. It could be bargained with. Look at that dividend deal with the Eskenazis. The indignation with which Repsol is trying to rally the European Union against Argentina is that of one who has lain down with dogs and woken up with fleas. “Private” multinationals often operate in cahoots with government. South American leftists have figured this out. When Chávez unilaterally repudiated certain oil contracts in the Orinoco basin in 2007, Exxon fought Venezuela for compensation, but Chevron and several other companies accommodated themselves to Chávez’s new rules. 

The world looks awfully different today than it did 13 years ago, when Repsol took over YPF. Who knows what it will look like 13 years from now? China might have a fleet of warships in the South Atlantic. Had Repsol sold its controlling stake to the Chinese, what then? If you believe most Chinese business is beholden to the Chinese government—a reasonable belief—then the fiction of YPF’s total independence from the state would grow less plausible. You’d again have a government-run energy sector in Argentina, just as you did before 1993, except that the government doing the running would be a foreign one. To many Argentines, Repsol’s profits would then look like a fee for taking a colossal energy resource and transferring it from the Argentine government to the Chinese one. Maybe it should not surprise us if Argentines are happy Señora Kirchner said no thanks, whatever her reasons.

Christopher Caldwell is a senior editor at The Weekly Standard.

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