Fernandez is making YPF her Falklands War, takes on Spain, EU

President Cristina Fernandez

Argentina has taken a step closer to becoming another Venezuela. In a populist style move, President Cristina Fernandez is trying to nationalize YPF Sociedad Anonima, an oil and gas company operating in South America, US, and Indonesia. If successful, the government of Agentina would control 51% of the company and as Fernandez says, it's all for "public good".

Washington Post: Argentine President Cristina Fernandez says she is proposing a bill to nationalize the YPF oil company that is controlled by Spain’s Repsol.

She says in an address to the country that the measure sent to congress on Monday is aimed at recovering the nation’s sovereignty over its hydrocarbon resources.

But by doing so, Argentina is replaying the Falkland Islands fiasco. After all it's the 30th anniversary of the Falklands War, and some Brits are genuinely concerned about an actual invasion on the islands. Except rather than fighting the UK, Argentina is taking on Spain, since YPF is controlled by Repsol, a Spanish firm (as though Spain doesn't have enough problems to deal with). This type of warfare is much easier for Argentina to execute than an actual invasion and the improvement in popular support may be just as good. Spain and the EU are vowing to defend their firms' interests around the world - it will be interesting to see how far they are willing to go. Certainly EU orchestrated economic sanctions may be in the works.

Needless to say the YPF shares sold off a bit.

YPF share price (Bloomberg)

With the economy stalling, this is the ultimate "wag the dog" approach to improve Fernandez' flagging support. After the tremendous amount of progress the nation has made in the past decade, this move may set Argentina back to the "banana republic" status.

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