Argentina pulls back over YPF seizure Argentina's desire to renationalise Spanish-controlled oil company YPF appears to have been delayed rather than abandoned, but Spain warned on Friday that it would become "an international pariah" if it went ahead. Cristina Fernández, Argentina's president, had been widely expected to announce plans to seize as much as 50.01 per cent of YPF on Thursday, and a draft of one of several proposals circulating within the government was leaked to Clarín newspaper. In the end, Ms Fernández held back, in part, one official said, because of opposition from provincial governors, as well as legal issues. Argentina's oil and gas reserves are the property of its provinces, not the state, so governors fear a loss of influence in a sector that is a key money-spinner for many regions. But attempts to put the state back in the driving seat of its former oil monopoly - now controlled by Repsol of Spain - still look set to continue. "One way or another, I think it now seems clear some form of nationalisation will take place, and frankly, I think Repsol is going to see very little in terms of compensation," said one former Repsol board member. I think it is going to be a total mess. According to the draft proposal published in Clarín, the government would declare 50.01 per cent of YPF in the national interest. The state would do this by ejecting the Argentine partners in the company, the Eskenazi family, who own 25.46 per cent, and taking a chunk of the 57.43 per cent owned by Repsol. Just over 17 per cent of YPF is traded on stock markets, mostly held by institutional investors. The draft plan appears to be a deliberate attempt to leave them unaffected and avoid controversy in international markets. But Argentina would probably face legal challenges in seeking to argue that only some shares, and not others, are in the national interest. Furthermore, any acquisition of 14.9 per cent of the company would trigger a full-scale bid with a preset pricing mechanism. The draft plan published by Clarín, on the other hand, talked of a state tribunal setting the price with the government. Repsol would be likely to respond with an avalanche of legal action, and Madrid has made clear it would not sit on its hands. José Manuel García-Margallo, Spain's foreign minister, stressed that the consequences "would not just be economic." Madrid says Argentina possesses diplomatic weak spots that can be exploited, such as pressing Buenos Aires in negotiations to pay its Paris Club debts or watering down sympathy for Argentina's claims to the Falkland Islands. Perhaps more effective could be the threat of ejecting it from the G20. But one observer who has followed the issue closely said Spain has little leverage with commercial reprisals and its best bet is to exploit the question of investor confidence in Argentina. Repsol, meanwhile, faces additional risks from vendor finance loans made to the Eskenazi family's Petersen group when it bought into YPF in 2008 at the behest of then president Néstor Kirchner, Ms Fernández's late husband, who wanted to "Argentinise" YPF. Half of the loan made to the Eskenazis to buy the stake was made by banks, with the other half financed by Repsol. The interest on the Repsol half is accrued until 2013, meaning the company has not yet received any interest or principal. Under the terms of the deals with the Eskenazis, Repsol must buy back the shares at the acquisition price - which was just over $38 per share - if its control falls below 50 per cent or YPF curtails dividends. But some analysts argue that Repsol's share price has been battered down by fearful investors to such an extent that the YPF holding is viewed as worthless. Assuming YPF was worth zero, and the loans to the Peterson group were written off, then the fair value of Repsol shares would be €20.50, according to analysts at BPI, versus a current price of about €17.50.