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DE RUEHBU #0675/01 1001902
ZNY CCCCC ZZH
P 101902Z APR 07 ZDK CTG RUEHZC SVC #698
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC PRIORITY 7780
INFO RUEHAC/AMEMBASSY ASUNCION PRIORITY 6086
RUEHRL/AMEMBASSY BERLIN PRIORITY 1056
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RUEAIIA/CIA WASHINGTON DC PRIORITY
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RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC PRIORITY
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C O N F I D E N T I A L SECTION 01 OF 03 BUENOS AIRES 000675 
 
SIPDIS 
 
SIPDIS 
 
TREASURY FOR NANCY LEE, AJEWEL, WBLOCK, LTRAN 
NSC FOR JOSE CARDENAS, ROD HUNTER 
PASS FED BOARD OF GOVERNORS FOR RANDALL KROSZNER, PATRICE 
ROBITAILLE 
PASS EXIM BANK FOR MICHELE WILKINS 
PASS OPIC FOR JOHN SIMON, GEORGE SCHULTZ, RUTH ANN NICASTRI 
USDOC FOR 4322/ITA/MAC/OLAC/PEACHER 
 
E.O. 12958: DECL: 04/09/2017 
TAGS: EFIN ECON EINV AR SP KSTC KFPC
SUBJECT: SPANISH AMBASSADOR ESTRELLA ON REPSOL, RADARS AND 
PARIS CLUB 
 
BUENOS AIR 00000675  001.2 OF 003 
 
 
Classified By: Ambassador E.A. Wayne for Reasons 1.4 (b,d) 
 
¶1.  (U) This is an action request.  Please see paragraph 8. 
 
------- 
Summary 
------- 
 
¶2. (C) Ambassador met April 4 with Spanish Ambassador to 
Argentina Estrella (protect).  Estrella had recently been the 
target of false leaks to the daily paper Clarin which alleged 
that President Kirchner had privately asked Estrella for more 
investment by Spanish-owned energy firm Repsol-YPF in 
Argentina and for an Argentine equity stake in the company. 
The Spaniard explained that Kirchner had only welcomed 
Repsol-YPF's presence and confirmed that he did not support 
re-nationalization of the firm's assets in Argentina.  The 
rest of the false report was likely supplied by Secretary of 
Energy Cameron or others in the Planning Ministry, who 
believe Repsol is not investing aggressively enough and who 
favor a growing Argentine presence in the nation's 
foreign-dominated oil and gas sector.  Estrella also 
confirmed that Spain intended to treat in the Paris Club the 
$680 million of Argentina's debt to Spain not covered by the 
recent bilateral agreement and that, while Spain had promised 
to seek creative debt solutions, it would not break Paris 
Club solidarity.  Finally, he briefed on a Spanish supply of 
radars to Argentina and said the transfer of some older 
US-made radars would require US approval.  Please see action 
request, para 8.  End Summary 
 
¶3. (C) Highlights of the Ambassador's April 4 conversation 
with Spanish Ambassador Rafael Estrella Pedrosa included: 
 
--------------------------- 
Unhappiness with Repsol-YPF 
--------------------------- 
 
¶4. (C) On March 26, Estrella paid his first call on President 
Kirchner.  After the meeting, the Spanish Ambassador told the 
press that the President had told him that he does not favor 
the re-nationalization of Spanish-owned Repsol-YPF, contrary 
to earlier press reports that the some in the government 
wanted to increase Argentine presence in the company.  On 
March 30, a column in the Argentine daily Clarin claimed, 
with supposed presidential quotes, that Kirchner had told the 
Spaniard that Repsol-YPF was not investing enough in its 
Argentine concessions and had encouraged an Argentine equity 
stake in the firm.  Estrella said this story was completely 
false and that he had immediately called Clarin to complain 
(the Ambassador recounted our own similar problems with 
Clarin articles).  He said President Kirchner had made no 
complaints about Repsol, nor had he discussed the question of 
Argentine capital, but that he had asked Estrella to talk to 
Planning Minister De Vido. 
 
¶5. (C) In Estrella's subsequent meeting with De Vido, the 
Planning Minister talked of his discussions with Repsol-YPF 
about future exploration and investment in production, but 
 
BUENOS AIR 00000675  002.3 OF 003 
 
 
had never mentioned the possibility of losing concessions or 
of increasing the presence of Argentine capital in 
Repsol-YPF.  Subsequently, the false version of events 
appeared in Clarin.  The Spanish Ambassador speculated that 
Energy Secretary Daniel Cameron or others in the Planning 
Ministry were the like source of the stories.  They had 
complained previously that Repsol-YPF's investments in its 
Argentine concessions were inadequate, and they had also been 
talking to Argentine-owned energy company Bridas and to 
prominent local banker Jorge Brito about investing in 
Repsol-YPF.  The Spanish Ambassador believes that some in the 
Planning Ministry want to increase local capital and presence 
in the Argentine energy sector at the expense of 
multinationals and that some favor an increasing state role. 
There is even speculation that Planning Minister De Vito may 
be looking to become the head of the nascent government 
energy company ENARSA. 
 
¶6. (SBU) Note: In 1999, Spanish energy major Repsol merged 
with Argentina's Yacimentos Petroliferos Fiscales (YPF), the 
formerly state-owned oil company. The combined entity is now 
one of the world's 10 largest private oil enterprises and its 
Argentine integrated exploration, development, refining and 
pipeline activities contribute about one third of 
Repsol-YPF's earnings.  Repsol-YPF Chairman had announced in 
May 2006 that the company was considering a float of up to 
20% of its stake in YPF (valued at Euro 2.5 billion) on the 
Buenos Aires stock exchange.  End Note 
 
--------------- 
Spanish Radars 
--------------- 
 
¶7. (C) Estrella said that Kirchner had asked him to see if 
Spain could help provide back-up civilian air control radars 
quickly to bolster the faltering system supporting Buenos 
Aires' two main airports.  (The main radar at the 
international airport was hit by lightening recently and the 
system has been plagued by technical and human error, 
resulting in more delays that usual and many complaints by 
travelers, pilots and air controllers.)  Estrella called the 
Spanish President's chief of staff and agreement was 
subsequently reached for Spain to quickly provide a back-up 
system.  (Comment: This version generally tracks with 
Embassy's own understanding of the situation.  We understand 
that some used radars are being delivered from Spain, but 
still have not arrived, or at least have not yet been 
installed.  End Comment). 
 
¶8. (C) Estrella said that Spain also offered to provide 
several used 2D military radars to Argentina for one peso. 
But as these are US made radars, the USG would need to 
approve the transfer.  Comment: Argentina Defense Minister 
Garre has also queried Ambassador about US regulatory 
approval of this transfer.  Could Department and Embassy 
Madrid please provide information of the status of the 
Spanish request. 
 
--------------- 
 
BUENOS AIR 00000675  003.22 OF 003 
 
 
Paris Club Debt 
--------------- 
 
¶9. (C) On March 23, Spain's Council of Ministers approved a 
restructuring deal with the GoA which covers US$982 million 
in debt that Spain had provided shortly before Argentina's 
economic collapse.  Ambassador Estrella confirmed that 
approximately $680 million in debt contracted earlier would 
be considered for treatment in the Paris Club context.  He 
said he had promised Kirchner that Spain would work to find a 
creative Paris Club solution given Kirchner's opposition to 
an IMF program, but that Spain had already rebuffed a 
proposal from the GoA that part of its debt be swapped for 
assistance/investment in Argentina's education sector. 
Comment: Dutch Ambassador noted that in EU meetins here, the 
Spanish and others are urging Paris Club flexibility.  End 
comment. 
 
-------------- 
Civil Aviation 
-------------- 
 
¶10. (C) Estrella said that he continues to encounter 
"strange" commercial dealings in Argentina.  One Spanish 
airline company, Air Europa, had been cleared to take over 
the routes given up by failed company Air Madrid, but days 
before the first flight was told that all the papers were not 
correctly filed.  But the government would not tell the 
airline what papers were incorrect.  After intervention by 
the Spanish government, it was discovered that the GoA wanted 
the Spanish carrier to take over the routes and assets of the 
poor-performing, money-losing, government-owned domestic 
carrier LADA, as part of the deal.  The Spanish carrier has 
so far refused. 
 
----------- 
Natural Gas 
----------- 
 
¶11. (C) The Artentina Government has shown flexibility on one 
other important commercial issue.  Cabinet Chief Alberto 
Fernandez promised Estrella several weeks ago that the GOA 
would approve a natural gas consumer price increase; Spanish 
interests have a large role in the natural gas distribtion 
company, Natural Gas BAN.  The rate increases were formally 
announced on April 9. 
 
------- 
Comment 
------- 
 
¶12. (C) Estrella is off to a strong start here managing a 
major commercial and political relationship.  In the energy 
sector, clearly some in the GoA would like a way to get back 
more control either directly through building up national oil 
company ENARSA or indirectly by increasing the presence of 
more pliant domestic capital and companies. 
WAYNE