Cristina: she is not alone

However serious the YPF nationalisation crisis is for YPF, Repsol, Argentina and Spain, its overall impact on emerging markets has been limited, with EM equities falling on Tuesday by just 0.2 per cent.

This may prove complacent. Argentine president Cristina Fernández’s move is an awkward reminder of the willingness of governments to intervene in the natural resources industries. She is extreme, but she is hardly alone.

On Tuesday, the day after Fernández made her shock announcement, Mongolia suspended the exploration licences of coal miner SouthGobi Resources, prompting fears that the action might undermine a takeover bid from Chalco, China’s state-run aluminium group. As Reuters reported, Chalco this month agreed to pay $926m for a 57.6 percent stake in SouthGobi held by billionaire Robert Friedland’s Ivanhoe Resources.

Mongolia’s intentions weren’t clear but the news was enough to take 10 per cent off SouthGobi’s Hong-Kong-listed shares.

Meanwhile, Indonesia last month capped foreign ownership of key mines at 49 per cent. And ministers have followed by floating plans for a 25-50 per cent tax on exports of coal and base metals.

In Ecuador last month Rafael Correa, the populist president, blessed a $1.7bn deal with China-backed Ecuacorrientes to kickstart the country’s nascent mining sector. It gives the government a full 52 per cent of the profits of the Mirador copper deposit, Ecuador’s first large-scale mining project.

Ecuacorrientes, a unit of Corriente Resources, a joint venture of China Railway and Tongling Nonferrous Metals Group, will also pay $100m in advance royalties. It was widely seen in the mining industry as pushing to new limits the role of the state in Ecuadorian metal mining.

Elsewhere, the forces of economic liberalism are holding resource nationalism at bay. In South Africa, the ruling African National Congress has recently distanced itself from calls for the nationalisation of the mining industry by expelling youth leader Julius Malema.

But, particularly in energy, state ownership predominates in emerging markets, as Kirchner pointed out in her speech on Monday: “The United Arab Emirates control 100 per cent of their oil and gas industry; the same with China, Iran, Venezuela, Uruguay, Chile, Ecuador, Mexico, Malaysia and Egypt among many others. Colombia holds a 90 per cent stake, Russia’s Gazprom holds a 50 per cent stake [in gas], Brazil [has a 51 per cent government stake] in Petrobras. So this is not something we came up with one day and all of the sudden.”

Expropriation has a long history, Mexicans celebrate March 18 as the Anniversary of Oil Expropriation – the day in 1938 when president Lázaro Cárdenas threw foreign companies out of the industry (notably a forerunner of Pearson, the FT’s owner).

Moreover, non-state oil companies have shown themselves most adept in swimming through these dangerous waters. They take big hits, from time to time, as Repsol may now do. But they come back for more, even where the political waters remain shark-infested.

In Russia, for example, ExxonMobil of the US on Monday formalised a partnership deal announced last year with state-controlled Rosneft – a company created largely from the assets expropriated from the bankrupt Yukos oil group.

Yukos didn’t at the time have a foreign partner but it had plenty of foreign portfolio shareholders, who lost out. Nor was Exxon alone in wooing Rosneft. BP got their first but failed to consummate the relationship.

Big oil has no choice – it must go where the oil is. The governments of resource-rich nations do have choices. In times of high commodity prices, such as today, the temptation to take control is strong. The foreign experts will come anyway, with their technology and capital.

But, when the commodity cycle turns, it tends to turn very sharply. Projects that seemed certain come to a sudden stop. The money disappears. For those with deep pockets, notably the Gulf rulers, this isn’t a problem. But for Fernández, it could be.

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