The old OIL WEAPON… still remains alive

April 16^th, 2012… the day Argentina took a drastic turn regarding its oil company YPF. Argentina’s president, Cristina Fernandez de Kirchner, decided to expropriate YPF back from Repsol.  It all started in the 1990’s when Argentina’s ex-president, Menem, decided to privatize Argentina’s oil company (among other national companies) in the hands of the Spanish oil enterprise, Repsol .¹ Repsol then owned 85% of the company, with 15% sold to other companies.² More than 10 years after, Argentina wants to re-gain control over its own oil and gas resources; however, such a decision might come at a high cost for both countries.

In a time where Argentina is not exactly in good terms with the European Union (due to conflicts with Great Britain over the Malvinas Islands), the expropriation of YPF from Repsol counts as another tactic punch from the Argentinean president to recover what once belonged to them. With the expropriation of YPF, Argentina will gain back its sovereignty over 51 percent of the company’s stake and with it the control over a big sector of the country’s economy.¹ According to Argentina’s government, Spain exploited oil and gas reserves³ (See Figure 1 for the production chart of Repsol YPF S.A. over a period of 20 years⁴). The Argentinean vice-minister of Economy, Axel Kicillof, said: “Between 1999 and 2011, the YPF petroleum and gas reserves decreased 40.5% and 47.1%, respectively, while the petroleum and gas production decreased 38.3% and 25.4%, respectively. This is about a predatory behavior. An oil company that every time produces less and that at the same time decreases its reserves, is a company been emptied.” This, among other strong accusations from the Argentinean government, drove Cristina de Kirchner to take over the oil company and make it their own once again. However, Repsol is obviously not very happy about the situation presented. Along with a strong economic recession, now Spain has to also worry about a decrease of two-fifths of their crude oil reserves and one third of Repsol’s profits, Spain’s largest company.¹

                In retaliation to the expropriation of YPF, Spain is looking into employing a hybrid-oil-biodiesel-weapon against Argentina. Spain is seeking a way to restrict imports of biodiesel fuel from Argentina (Spain’s biggest biodiesel exporter with shipments worth €750 million, or $991 million, last year) in an attempt to recover control over Repsol YPF and Argentina’s oil and gas.⁵ However, this is only one of the many measures Spain is planning to implement against Argentina’s sudden decision.^1,5 Not to mention the international relationship repercussions  this heavily criticized action may have in the eyes of foreign companies such as the French oil company Total and the American companies Exxon Mobil and Apache that are making investments in the recent huge discoveries of shale oil in Argentinean soil.¹

              What now? What happens to the reliability of Argentina in making deals with other countries over oil, gas, biodiesel, or any other national company? Though it is understandable that a country wants to have ownership on decisions regarding its own natural resources and reserves, was maybe the way Argentina expropriated YPF from Repsol incorrect? Could have any other way had a smaller impact on the now very tense relationship between both countries? More importantly, will Spain be able to halt YPF from growing by employing oil and gas weapons?

References:

[1] http://www.nytimes.com/2012/04/17/business/global/argentine-president-to-nationalize-oil-company.html?pagewanted=all#

[2] http://dealbook.nytimes.com/2009/07/03/repsol-acknowledges-offers-for-ypf-none-certain/

[3] http://www.lanacion.com.ar/1468044-ypf-acuso-a-repsol-de-aplicar-una-politica-depredatoria-de-los-recursos-naturales

[4] http://markets.on.nytimes.com/research/stocks/tools/analysis_tools.asp?B64ENCc3ltYm9sPTI0MDg4OCZkdXJhdGlvbj0xMDk1MCZmcmVxdWVuY3k9MW1vbnRoJmRNaW49MCZkTWF4PTAmc2NhbGluZz1saW5lYXImZGlzcGxheT1maWxsY2xvc2UmdXBwZXJzPVt7InR5cGUiOiJldmVudCIsInZhbHVlIjoiZHBwIn0seyJ0eXBlIjoiZXZlbnQiLCJ2YWx1ZSI6Im5ld3MiLCJwYXJhbXMiOiIyNDA4ODgifV0mbG93ZXJzPVt7InZhbHVlIjoidm9sdW1lIiwicGFyYW1zIjoiRU1BLDEzIn1d

[5] http://www.nytimes.com/2012/04/21/business/global/spain-stings-argentina-over-nationalization-of-repsol-ypf.html?_r=1

Do what I tell you to but don’t do what I do

Tension has grown stronger between Iran and the US and European Union in the past few years. While Britain, China, France, the US, India, Pakistan, Russia, and North Korea have nuclear weapon capabilities,¹ Iran is being questioned on whether they should keep developing their nuclear power technologies due to the growing suspicion that Iran’s purpose is to develop nuclear weapons.^2,3  Because of the increasing tension regarding this situation and the non-responsive evasive attitude from the Iranians, some of the countries in the European Union as well as the US have decided to cut Iran off from the International financial system.² This decision includes restrictions by the US to Iran’s nuclear, petrochemical, and oil industries in an attempt to manipulate the Iranian government. At the same time, the European Union decided to stop importing Iranian crude oil.⁴ Apparently, that was the feather that broke the camel’s back. In retaliation to the measures taken by the leader countries, Iran stopped all exports of oil shipments to England and France.⁵ Iran’s Oil Ministry spokesman Ali Reza Nikzad-Rahbad, adding to the already heated situation, said, “We have our own customers and have no problem to sell and export crude oil to new customers”.⁵ The cut to the European nations caused oil price to rise to $121.12 and decrease to $120.46 a barrel all in one day.⁴ According to the newspaper The Telegraph (UK), the halt in Iranian oil exports has little impact on UK’s economy since they have not been buying Iran’s oil for the past six months.⁴ However, the case might not be the same for France as they import 75,000 barrels from Iran every day⁴.

See video on World News

Iran assures that their development of nuclear power has only energy and research purposes.⁶ Then, why do they refuse to provide the authorities with specific information? If there is nothing to hide, why the secrecy? Despite all the accusations, Iran keeps rejecting any attempts made by the International Atomic Energy Agency (IAEA) to obtain specific information regarding their research as well as to check the installations where these nuclear projects are thought to be held.⁶ Conversely, more and more information obtained by other sources points towards Iran constructing nuclear weapons. First, in a report made by IAEA last year, it was communicated that there are indications of “clandestine activity” by the Iranians which involved technologies that could be used for civilian, military nuclear programs, or specific to nuclear weapons.⁶ Second, the IAEA was rejected access to a site suspected to have conducted “high-explosives testing”.⁶ Third, there are suspicions that the Iranians have designed the core of a nuclear warhead by computer modeling and “alleged preparatory work for nuclear weapons test”.⁶  Most importantly, Iran has kept increasing uranium enrichment at higher levels than what they started with, having Tehran producing around 240 pounds of higher-level uranium enriched to 20 %.⁶ According to the report,⁶ this amount of uranium produced, and at such a high enrichment level, would be close to half of what it is needed to construct a nuclear warhead. Additionally, Iran has increased the amount of centrifuges producing lower-enriched material to 9,000 which accounts for around 12,000 pounds of this material.⁶

Let us look at the same issue from another point of view. Who has the authority to dictate whether a country is allowed to have nuclear power for military purposes or not? During the Second World War in 1945, the US employed not only one but two nuclear bombs against the cities of Hiroshima and Nagasaki killing 90,000-166,000 people in Hiroshima and 60,000-80,000 people in Nagasaki within the first two to four months.⁷ After such a terrible and deadly event, the US, UK, France, etc. still have nuclear weapons at hand even after signing the Nuclear Non-Proliferation Treaty⁸. So, how? How can anybody control that nuclear technologies are being used for the right purposes? Would any of the leader countries agree to open their home doors for some stranger to look inside and analyze their nuclear research and technologies?

Even though Iran’s stubborn position is not helping at all dissipate the tension and fear of all the other nations and international entities (on the contrary, it is only making the situation worse and worse with each passing day), how can any of the “leader” countries control the situation? Under what moral basis can the UK, US, and France try to manipulate or solve the disagreement when they themselves have nuclear weapons at hand? How can they tell Iran not to do what they do? Imagine the situation when a mom smokes and her kids watch her doing so. What can she possibly tell them when they grow up and start smoking too? Smoking is bad for you! she would probably say angrily… Yet, if smoking is so bad for your health or has POTENTIAL THREAT to your health, how does she justifies doing it herself in the first place? Lead by example, maybe?

On a side note, I recommend reading this article by The New York Times: http://www.nytimes.com/interactive/2011/05/31/science/new-evidence-on-irans-nuclear-aspirations.html?ref=science, where it is described why the IAEA fears Tehran’s nuclear program aims to build a nuclear device.

REFERENCES

[1]        Infoplease: All the knowledge you need. Countries with nuclear weapon capabilities. http://www.infoplease.com/ipa/A0762462.html. (accessed Feb 22, 2012).

[2]        The New York Times. World. http://topics.nytimes.com/top/news/international/countriesandterritories/iran/index.html. (accessed Feb 22, 2012)

[3]        BBC News. Middle East. http://www.bbc.co.uk/news/world-middle-east-15960731. (accessed Feb 22, 2012).

[4]        The Telegraph. Iran stops oil exports to UK and France. http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/9092323/Iran-stops-oil-exports-to-UK-and-France.html. (accessed Feb 22, 2012).

[5]        WorldNews. Iran Oil Ministry: Exports cut to Britain and France. http://worldnews.msnbc.msn.com/_news/2012/02/19/10448533-iran-oil-ministry-exports-cut-to-britain-france. (accessed Feb 25, 2012)

[6]        North County Times. UN atom agency: Iran rapidly expands nuke work. http://www.nctimes.com/business/un-atomic-agency-iran-rapidly-expands-nuke-work/article_13073bb3-0c9f-53fe-ae32-37d8188ea7b5.html. (accessed Feb 25, 2012).

[7]        Wikipedia. Atomic bombings of Hiroshima and Nagasaki. http://en.wikipedia.org/wiki/Atomic_bombings_of_Hiroshima_and_Nagasaki. (accessed Feb 25, 2012).

[8]        Wikipedia. Nuclear non-proliferation treaty. http://en.wikipedia.org/wiki/Nuclear_Non-Proliferation_Treaty (accessed Feb 25, 2012).