YPF Repsol: Spain says Argentina shot itself in foot

Demonstrators in Buenos Aires backed the nationalisation of YPF on Monday

Spain has said Argentina shot itself in the foot with its decision to nationalise the Spanish majority stake in the YPF oil company.

Foreign Minister Jose Manuel Garcia-Margallo said he had warned the Argentine ambassador of damage to relations between the two countries.

The majority stake in YPF is owned by Spanish oil firm Repsol, whose shares fell by 6% in Madrid.

The nationalisation alarmed investors but is said to be popular in Argentina.

Repsol has vowed to demand compensation, saying it could seek international arbitration over its 57% stake in YPF.

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Analysis

Tom BurridgeBBC News, Madrid

The rhetoric shows that there is real anger in Madrid but the best course of action for Spain's government now is less clear.

It will want to send a signal to Buenos Aires to show that its plan to take over Repsol's stake in YPF is not acceptable. However Spain and Argentina are strong trading partners, and when your economy is facing trouble at home, you need all the help you can get from abroad.

There will also be concern over other large Spanish companies based in Argentina, like the mobile phone operator Telefonica or Spain's biggest bank, Santander.

Madrid already has support from the EU and, on his scheduled trip to Colombia and Mexico, Spain's Prime Minister Mariano Rajoy will want to garner support in Argentina's immediate region.

"These acts will not remain unpunished," Repsol executive chairman Antonio Brufau told reporters.

The head of the European Commission, Jose Manuel Barroso, said he was "seriously disappointed" by Argentina's decision and that the EU expected the country to "uphold international commitments and obligations".

The European Commission had been due to hold talks with Argentina later this week as part of a trade and economic treaty but the meeting was postponed and a Commission spokeswoman said "all possible options" were being considered.

'Friendship' strained

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