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Argentina unhappy over EU biofuels curbs

Aug. 20, 2012 at 6:05 PM   |   Comments

BUENOS AIRES, Aug. 20 (UPI) -- Argentina's $2 billion biofuels export market is at risk from an EU trade dispute that has been complicated by Argentine seizure of local energy company Repsol YPF.

Argentine President Cristina Fernandez de Kirchner rushed legislation through Parliament in May to nationalize the energy company, ignoring Spanish warnings the takeover would adversely affect Argentina's trade ties with EU partners.

Spain's repeated moves to have the nationalization reversed and later to seek compensation for the seizure were thwarted by Buenos Aires.

What began as an Argentine-Spanish row over the future of Repsol YPF is now a full-blown dispute involving Argentina, its Mercosur partners in Latin America and EU members.

Argentine biofuel exports are facing increased limitations in Europe, firstly because of Spanish restrictions and then as a result of EU measures that match or go beyond Spanish measures.

As access to Argentine biofuels diminishes, with grave consequences for Argentina's biofuels industry, Buenos Aires is escalating the war of words with EU officials. Critics said Argentina should seek talks with Brussels to resolve the dispute.

EU curbs on Argentine biofuels would have damaging repercussions for Argentina's biofuels industry and could rebound on the Fernandez administration, analysts said.

Argentina is the world's third largest exporter of soy oil. In 2011 the country earned about $2 billion through exports of biofuels.

Argentina suffered similar setbacks in its soybean trade with China.

The Argentine government's line that EU curbs flout World Trade Organization rules has been ignored by Brussels, even after Buenos Aires announced the first steps toward lodging a formal complaint with the WTO.

A Foreign Ministry statement said the government had "initiated the process" to formally accuse the European Union of measures impeding access to Argentine biofuels "thus violating the WTO norms."

EU curbs on Argentine biofuels follow Spanish restrictions, announced in April in response to Argentine seizure of YPF.

Argentine seized control of the majority 51 percent of Repsol holdings in YPF in April, then followed up the seizure with legislation to formalize the takeover.

Argentine biofuels product is a leader in fuel efficiency and costs, the government says, adding the EU curbs will likely affect most biofuels producers, as most of them are in the developing world and emerging markets.

Exactly how much of the biofuels capacity is being used remains unclear. Last week the Argentine government eased rules for the import of soybean from Bolivia and Paraguay keep the country's oil-seed crushing plants busy.

EU officials say that the import curbs affecting biofuels are a response to Argentina's own restrictive trade practices that have obstructed imports from EU and other trade partners. Argentine taxation is also seen as a major disincentive to biofuels exporters.

Argentine officials say the trade curbs are necessary to control the country's import bill.

However, critics say the government's move to discourage imports by introducing more bureaucracy and taxation have angered the business community.

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