Reuters: Regulatory News: UPDATE 3-Spain fuels biodiesel retaliation against Argentina

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UPDATE 3-Spain fuels biodiesel retaliation against Argentina Apr 20th 2012, 19:30 Fri Apr 20, 2012 3:30pm EDT * Could curtail imports from Argentina * Follows Argentina taking control of oil firm YPF * Spain had threatened 'consequences' for that move By Martin Roberts MADRID, April 20 (Reuters) - Spain retaliated against Argentina on Friday for seizing control of a Spanish-owned energy firm with a measure that could curtail imports of biodiesel from the Latin American country. The Spanish industry ministry will approve a biodiesel plan later on Friday, Deputy Prime Minister Soraya Saenz de Santamaria said after a weekly cabinet meeting. She gave no details, but one possibility would be a measure giving preference to European Union-produced biofuel in meeting compulsory motor fuel blending requirements. Spain's biodiesel industry has lobbied for such a rule for years. "The goal is to encourage the use of biodiesel of EU origin," an industry ministry source told Reuters. In all, 74 percent of biodiesel used in Spain is imported, and 90 percent of that comes from either Argentina or Indonesia. Spain has threatened "consequences" for Argentina since it decided to expropriate 51 percent of oil company YPF from Madrid-listed Repsol. But tough action is difficult against a country that has been shut out of world debt markets and has ignored international fines in previous disputes. Argentina is the world's top supplier of soyoil and soy-based biodiesel. Heavy investment in the burgeoning green fuels sector took biodiesel exports to a record high of 1.7 million tonnes in 2011. More than 12 million tonnes of Argentine soybeans were used last year to make biodiesel, compared with total production of some 49 million tonnes in the 2010/11 growing season. Spain bought 66 percent of Argentina's biodiesel shipments abroad between January and March of this year, according to the private Argentine Biofuels Chamber (Carbio). "The exclusion of Argentina would have direct, negative effects on production and sales," said Gustavo Idigoras, an Argentine biofuels analyst. "The country would have to make a bigger effort if it lost the Spanish market." WIDENING RAMIFICATIONS Earlier, the European Parliament condemned Argentina's move and urged the executive European Commission to consider reprisals, including the suspension of trade benefits, mirroring a recent decision by the United States. U.S. President Barack Obama decided last month to suspend Argentina from the U.S. Generalized System of Preferences (GSP) programme, which waives import duties on thousands of goods from developing countries, after it failed to pay compensation awards in two disputes involving American investors. Argentina has already said it won't pay Repsol the full amount the Spanish company wants for its stake in YPF, which has been under intense pressure from the center-left government of Argentine President Cristina Fernandez de Kirchner to boost production. Repsol has said YPF was worth $18 billion as a whole and that it would seek compensation on that basis. One member of the European Parliament, conservative Martin Callahan from Britain, called on EU foreign ministers to launch a joint initiative to expel Argentina from the G20. "Hard-hitting words from the EU are only playing to President Kirchner's nationalist agenda, bolstering her position against the West," Callahan said in a letter to EU High Representative Catherine Ashton on Friday. BIODIESEL NEEDS Argentina is set to become one of the world's top producers of biodiesel thanks to a growing domestic market and profitable exports with estimated production of 3 billion litres for 2012, according to a U.S. Department of Agriculture (USDA) report. Spain had threatened to limit its imports for some time, even before the YPF issue, under pressure from industry lobbies. "Nonetheless, local traders are confident that if this happens, they will be able to shift to other markets," the USDA report said. Industry sources estimate Spain imported 720,000 tonnes of biofuel from Argentina in 2011, worth some 750 million euros ($990.6 million). Spanish biofuel plants are currently running at an estimated 14 percent of capacity. Producers say biofuels help combat global warming because the plants used absorb more carbon dioxide than does the fuel they produce when it is burned. Environmentalists dispute that, saying account must be taken of land set aside for growing plants for biofuel, which they say could also be used in many cases for much-needed food. Official data show 8 percent of diesel used in Spain is made from oilseeds, or above a legal minimum of 6 percent to comply with EU targets. Link this Share this Digg this Email Reprints

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