President Cristina Fernández announced on Monday the immediate takeover of YPF, a unit of Spanish oil major Repsol, and said she will ask the Argentine Congress to approve the expropriation of 51 percent of the Latin American country's leading oil and gas producer.
A senior official of the Planning Ministry arrived at YPF's Buenos Aires headquarters just minutes after the president's comments during a nationally broadcast event, sources at the originally state-owned firm told Efe.
Roberto Baratta, until now the government's sole representative on the YPF board, presented a list of directors who are to be removed and ordered changes to the building's security, the sources said.
The Argentine central government will hold 51 percent of the expropriated YPF shares, with the rest to be distributed among the provincial administrations, Fernández said.
YPF, once held up by Fernández's administration as a model corporation, has come under escalating official criticism for fuel shortages, a drop in oil and gas output and inadequate investment.
"Continuing the policy of asset stripping, with no production and no exploration, effectively would have turned us into an unviable country, not from lack of resources, but from business policies," the president said Monday.
Repsol currently holds 57.43 percent of YPF, while Argentina's Grupo Petersen has a 25.46 percent stake.
The Argentine government has 0.02 percent of YPF's shares, though the terms of the firm's 1999 privatization gave officials a veto and a seat on the board. The remaining 17.09 percent of the company's shares are traded on the Buenos Aires and New York stock exchanges.
The Buenos Aires exchange suspended trading in YPF around midday Monday. The company's shares plunged 18 percent in New York after Fernández's announcement, though they recouped some of that loss before the NYSE also suspended trading in the firm.
YPF has seen its market value fall by roughly $11 billion since January, when the Argentine government began ratcheting up its rhetoric against the 90-year-old firm.
Argentina's valuation tribunal will determine a price for the YPF shares that are to be expropriated, the government said Monday.
Spain warned Argentina last Friday that Madrid would defend its interests in the event of the nationalization of YPF.
"I hope this government doesn't have to take (measures in response to a takeover of YPF), but undoubtedly if it has to do so it will," Deputy Prime Minister Soraya Saenz de Santamaria said at a press conference.
She said Prime Minister Mariano Rajoy's government "has been working intensively" behind the scenes on the matter since January.
In the wake of Monday's announcement in Buenos Aires, sources in Rajoy's office said his administration was weighing an "appropriate response" to protect Spanish interests.
The European Commission, which had echoed Spain's warnings to Argentina against nationalizing YPF, sought to reinforce that message on Monday.
"A forced takeover by the Argentinian government would give a very negative signal to investors, national and international, and could seriously harm the business environment in Argentina," EU Trade Spokesman John Clancy said in Brussels.
YPF, one of the world's first vertically integrated oil companies, was among the numerous Argentine state-owned enterprises privatized in the 1990s under President Carlos Menem.
Repsol bought 14.9 percent of YPF directly from the government for around $2 billion in January 1999 and a few months later launched a public offer for the rest of the shares at a price that implied a value of $13.4 billion for the entire firm.
Six Argentine provinces - Santa Cruz, Mendoza, Chubut, Neuquen, Salta and Rio Negro - have recently revoked YPF's licenses to operate in more than 15 areas, while Tierra del Fuego and Formosa provinces have threatened to cancel YPF's production permits unless the company boosts investment.
YPF, which employs 13,500 people, said it planned to invest a record $3.42 billion this year in Argentina, up from $3.03 billion in 2011, and that its three refineries operated at maximum capacity last year.
The company said it incorporated 137 million barrels of oil into its reserves in 2011, "meaning that for the second consecutive year its reserve-replacement ratio exceeded 100 percent."