SPANISH oil giant Repsol said on Tuesday that it will demand compensation of at least $10bn from Argentina if the country completes plans to seize control of its largest oil company.
"These acts will not remain unpunished," said Repsol executive chairman Antonio Brufau, who vowed that it would "launch all legal actions that are within its reach".
Cristina Fernandez, Argentina’s president, announced on live television on Monday that the takeover of YPF would go ahead. She revealed that a bill had already been sent to Congress that would allow nationalisation of 51pc of the company.
Ms Fernandez said that pressure from foreign governments would not change her mind and she was acting in the national interest. “I am a head of state and not a hoodlum,” Ms Fernández said in her television address.
Repsol had been expected to lose half its 57.5pc stake in YPF, but the country will now confiscate almost its entire shareholding.
Mr Brufau said that he would seek an amount at least equal to the value of its YPF stake, which the firm estimates at $10.5bn.
Despite the threat of nationalisation, reports in the Chinese media suggested that China's second-largest oil company, Sinopec, was in talks with Repsol to buy YPF for more than $15bn.
Brussels also waded into the argument, indefinitely postponing a meeting with Argentine officials over trade and economic links between the EU and Argentina.
European Commission President Jose Manuel Barroso said he was "seriously disappointed" by Argentina's decision and warned that "this creates an uncertainty which is not helpful to our economic relations and to the economy as a whole."
Mr Brufau declined to comment on the rumours, although he said that Repsol had received interest from foreign compaines over YPF.
Spain, which has several sizeable operations in Argentina, warned that it would take "clear and forceful measures" in response. "It's a hostile decision against Repsol, thus against a Spanish business, and thus against Spain," Jose Manuel Soria, Spain's industry minister, said on Monday.
In Madrid, Jose Manuel Garcia-Margallo, Spain’s foreign minister, said measures against Argentina would be announced in the next few days.
“This has broken the climate of friendship that existed between Spain and Argentina,” Mr Garcia-Margallo added. “Spain had worked with Argentina during its hardest hours.”
The Argentine government has been tightening the noose on Repsol over recent months, withdrawing operating licences and accusing the company of failure to invest adequately in its Argentine operations. Repsol has denied these claims.
Spain is one of the biggest foreign investors in Latin America. Banking groups Santander and BBVA, and telecoms giant Telefónica have operations in Argentina.
Analysts at Investec said Repsol had been "tangoed" by Argentina's actions, and moved the stock to sell, from hold.
Stuart Joyner, an analyst at Investec, said: "We had hoped that Argentina would pull back from this extreme action, but, now that this is apparently off table, our worst case scenario values Repsol (with YPF at zero) at €15.62 [...] At a minimum, Repsol is now set to lose control of YPF and, of course, any compensation seems set to be at current depressed prices."
The shares fell 5pc on Tuesday morning, to €16.65.