海角大神

Following聽Argentina鈥檚 2012 re-nationalization of oil company YPF, Axel Kicillof, then the deputy economy minister, scorned a $10.5 billion compensation claim by its controlling shareholder,聽Spanish energy firm, Repsol. Only "madmen" would pay such a claim, he told lawmakers. A month later, Repsol sued Argentina in a New York court.

But yesterday, the wrangling came to an end. Mr. Kicillof, now Argentina's economy minister, agreed to pay $5 billion to Repsol聽via a series of bonds.聽

The deal, analysts say, is a pivotal step in Argentina鈥檚聽bid to polish its international image, tarnished by the expropriation, other outstanding credit issues, and trade protectionism. Settling with Repsol is also key to聽government efforts to attract foreign capital to develop the vast Vaca Muerta shale oil and gas field in the southwest of the country. However, the general consensus is that this week's move alone is not sufficient to allay foreign investor fears.

鈥淭his is positive as it finally brings the whole ordeal to an end,鈥� says Jorge Pi帽on, director of the Center for International Energy and Environmental Policy at the University of Texas. Repsol had threatened legal action against companies that partner with YPF and even sued Chevron, which signed a $1.2 billion deal with the company last year. 鈥淏ut we have to be careful about thinking that [this] absolves Argentina when it acted outside the rule of law,鈥� Mr. Pi帽on says.

Repsol is 鈥渧ery satisfied鈥� with the agreement, said company president, Antonio Brufau. Spanish officials will travel to Buenos Aires聽tomorrow聽to sign the deal, Kicillof said, 22 months after he and the planning minister ousted Repsol鈥檚 management from YPF鈥檚 offices here. The terms of the agreement must also be approved by Argentina's Congress, where President Cristina Fern谩ndez de Kirchner鈥檚 ruling party has a majority.

At the time of the seizure, Argentina said Repsol had failed to invest in the energy sector, and YPF needed to be controlled by the state so that the nation could stop importing more than $9 billion in fuel annually.

A 'paradox'?

However, by repaying Repsol with debt, including more than $3 billion of new bonds due in 2024, the government has backtracked on its drive to cut debt, one of the pillars in what President Kirchner describes as a 鈥渨inning decade.鈥� Argentina鈥檚 foreign debt as a percentage of GDP has declined drastically since N茅stor Kirchner, the president's late husband and predecessor, came to power in 2003.

鈥淚t鈥檚 paradoxical,鈥� says Gast贸n Rossi, a former deputy economy minister. 鈥淭hey speak of the virtues of debt reduction, and they solve this by issuing debt.鈥�

The government has also been forced into other contradictory moves. Kirchner had vowed not to devalue the peso, for example. Despite this, the currency was devalued last month after foreign currency reserves fell to a seven-year low.聽

鈥淸Issuing debt] goes against the rhetoric,鈥� says Horacio Lazarte, an economist that specializes in oil and gas at Abeceb, a Buenos Aires consultancy. 鈥淏ut reality imposes itself. [Paying cash to Repsol] would have been too strong a blow to the reserves.鈥�

'Caution'

Vaca Muerta holds the world鈥檚 second-largest reserves of shale gas and the fourth-largest reserves of shale oil, according to US Energy Information Administration data. While it is now set to become a more attractive investment prospect for foreign companies, ending the Repsol dispute 鈥渋s not enough鈥� to trigger deals similar to those Chevron and DOW Chemical聽struck聽with YPF to develop the the field,聽says Claudio Loser, an Argentine economist and senior fellow at the Inter-American聽Dialogue in Washington.

There will be no avalanche of international interest because of a range of factors, including distrust, high inflation, import restrictions, and strong government regulation in the energy sector, analysts say.聽The government is also accused of falsifying economic data on which investors rely.聽

鈥淐aution will rule,鈥澛爏ays Mr. Rossi.