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Reading between the lines, it appears that the recent diplomatic spat between Argentina and Spain over the renationalisation of YPF isn’t as clear cut as it would first appear. Neither is the likely outcome from an Argentinian perspective.
It has been portrayed by the western media as a direct and excessively desirous grab of a significant, privately owned asset, a desperate move by an economically distraught government. The company originally state owned, was privatised in 1999 for $15b and the majority shareholder (57%) is a major Spanish energy giant, Repsol (for those who didn’t know).
Rumours abound however, that prior to this renationalisation, Repsol were in negotiations with a Chinese NOIC behemoth (Sinopec), to offload their controlling stake to them.
This adds a completely new perspective on the row which has erupted between Spain and Argentina.
Added to this, Kirchner also claims that YPF has not been investing enough in its assets whilst hydrocarbon prices are at a premium. As a result, Argentina has been forced to import more and more energy, about $10bn last year.
Spain has condemned the grab, not surprisingly followed by other EU countries, and least surprisingly the UK, as have their Latin American neighbours, Mexico, Brazil and others. The US has publicly but cautiously stated their ‘deep concern’.
Alternately, Venezuelan President Hugo Chaves has supported it with great aplomb. Ecuador also wholeheartedly supports the move and Bolivia is potentially joining the pact as well. What unites this fraternity? They are all Marxist governments and believe in the deeply embedded notion that all natural resources and oil/gas in particular, belong to the people, and that proceeds from their extraction should go to the owners, i.e. the people of the nation.
Whilst this working class rhetoric, wringing the necks of the foreign imperialist capitalists and sticking it to conquistadors, is splendid rabble rousing stuff, the reality is that while Argentina possesses great hydrocarbon wealth, they stand a snowballs chance in hell of developing these resources by themselves and fully exploiting the wealth creation for the general populace anyway.
What Argentina does however increase, is the risk of developing the reputation of an international pariah, and is jeopardising potential future investments from traditional economic partners…leaving only one country that it can turn to in hope to develop her economy: China.
So in the short term, the asset grab of YPF for perhaps the valid reason of protecting its national assets from the influence of foreign control like Beijing seemed like a well justified idea, in the medium to long term, if the Argentinian political elite continue along the path of international isolation and refuses to normalise its relationship with the international financial and investment community, it looks like the only partner she will be able to turn to is, you guessed it….China.
And if Buenos Aires were to ever try similar tactics with Beijing, there would only be one winner.
As always, would welcome your thoughts and responses.
Jonathan Mooney is the Senior Consultant for Energy & Utilities at Interim Partners.
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It appears that there are two clear outcomes from the continued political and economic embargo being applied to Iran (let alone the ramifications of the supposed Israeli position).
1) Ordinary Iranians I suspect will, due to food shortages and inflation (topping out at almost 21%, according to the officially sanctioned press: http://bit.ly/A0DBSz), become increasingly disenfranchised with the West. As it’s unlikely that the clerical leaders and political class are prone to suffering from the current economic sanctions.
2) Iranians will on this basis alone and irrespective of their political and cultural ideologies, be forced to move towards new partners. Currently we know that they’re jettisoning the dollar and the euro, and trading in local currencies with countries like India (50% of their export of crude to India is now paid for in rupees for example), China, Russia and a number of others.
So with Brent crude oil currently trading at almost $125 a barrel and the reserves of the remainder of the OPEC nations potentially overstated; are Europe, the US and their predominately Western partners acting responsibly in view of their own long term strategies by continuing to isolate Iran?
Please leave your thoughts in the comment box below.
Jonathan Mooney is the Senior Consultant for Energy & Utilities at Interim Partners.
Click here to read other blogs on the Energy sector
BG Group is well positioned in developing markets. They have significant presence in Asia and Brazil, and these large emerging economies are continuing to witness strong growth in comparison to the more mature traditional nation states.
These emerging nations’ population dynamics are also outstripping the west. According to figures from the most recent UN Census report, between now and 2035 the world’s population will rise 1.7bn from 6.9bn to 8.6bn. Importantly, 110m of this figure will be within OECD counties and 1.6bn from developing counties. OPEC is also suggesting an increase in energy demand of 51% by 2035.
Therefore BG is well positioned to capitalise on this increased demand!
So, investment in BG Group’s stock should provide sustainable earnings and is a long term capital appreciation play?
I look forward to your thoughts.
Jonathan Mooney is the Energy & Utilities Senior Consultant at Interim Partners.
Click here to read other blogs on the Energy sector
Iran appears committed to its hegemonic aspirations within the gulf, flexing its muscles regionally on an almost daily basis (most recently with the large scale naval exercises around the Straits of Hormuz) and continuing its policy of developing itself into a credible nuclear player.
As the price of crude (over the long term) continues to rise on the basis of several factors – the eradication of reserves, continued global security threats and the political instability of some of the world’s largest exporters (GCC, Nigeria and North Africa for example) – we can add to this equation that the new major oil importers, notably China and India, are expanding their demand and the oil market will simply have to expand its production capacity.
Put simply, 66% of the world’s oil reserves reside in the Arabian region, and ultimately oil remains the world’s dominant source of energy and will continue to be for some time to come.
This indubitably promises to increase the world’s dependence on the Persian Gulf members of the Opec, especially Saudi Arabia and maintain upward pressure on price, in conjunction with the continued sabre-rattling emanating from Iran.
On this basis, what alternative strategies if any, should we be exploring to reduce our dependency on our future, free access to the region?
Jonathan Mooney is the Senior Energy & Utilities Consultant at Interim Partners.
Click here to read other blogs on the Energy sector
