Taxing Times: Global Tax And Nationalisation Update

Until April 2012, it had been looking like a rather quiet quarter on the sovereign risk front – that was until Buenos Aires revealed it would strip Repsol of its $10b stake in Argentina's biggest oil and gas company and Jakarta announced plans to tax coal and base metals exports at up to 50%.

In addition to these announcements, there have also been developments of interest in Russia and Australia.

Argentina - "Zero Pesos" for YPF stake

Argentina's recent move to acquire Repsol's controlling stake in YPF without compensation (for "zero pesos") has been widely reported as the result of growing discontent concerning energy prices and reliance on foreign sources of fuel. Professionals on the ground in Argentina have also commented that there is a further dynamic at play; being that many in Argentina see the terms of the 1999 acquisition by Repsol of its YPF stake as having been fundamentally unfair to Argentina. For its part, Repsol has announced that it reserves the right to take legal action against any party investing in the YPF and its assets and both Spain and the European Union are reportedly making concerted diplomatic efforts to facilitate a satisfactory resolution for Repsol.

At the same time, the Argentine government is reported to have approached Petrobras (the Brazilian state oil company) and to be intending to approach major private sector oil companies with a view to obtaining the investment (estimated at €25bn) and expertise necessary to bring key YPF assets online.

It will be interesting to see how the private sector now approaches YPF given the treatment of Repsol and also to see if Petrobras and Brazil are willing to deal in nationalised assets even if the risk to them of future nationalisation is considered relatively remote.

Indonesia – 50% Export Tax from 2013

Indonesia is reported to be planning new taxes on exports of coal and base metals this year, which will initially be set at 25% and will rise to 50% by 2013. Jakarta is also rumoured to be considering regulations requiring majority local ownership of mining projects.

These developments come hot on the heals on plans announced earlier in the year to ban exports of unprocessed copper, gold, silver, nickel, tin, bauxite and zinc by 2014.

The rationale for the proposed export taxes and ban is to encourage further downstream investment in refinement in Indonesia and to deliver associated economic benefits to Indonesians. This clearly makes some sense from a policy...

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