MADRID (AP) - Spain warned Argentina on Friday it risks becoming "an international pariah" if it tries to wrest control of energy company Repsol's majority stake in its South American YPF unit.
In an escalation of tensions between the two countries, Spanish Foreign Minister Jose Manuel Garcia-Margallo summoned Argentina's Ambassador Carlo Antonio Bettini to convey Spain's "concern" over possible nationalization of YPF, which represents 42 percent of Repsol's total reserves, estimated at 2.1 billion barrels of crude.
"Breaking the rules comes with a cost and Argentina could turn itself into an international pariah," said Inigo Mendez de Vigo, Spain's Secretary of State for European Affairs, in an interview aired on the Onda Cero radio network.
Garcia-Margallo said after meeting for an hour with Bettini that he hoped the confrontation could be resolved through dialogue, but that any "attack" against Repsol would be considered "an assualt on the Spanish government."
Shares of Repsol YPF SA were down 3 percent to €17.43 ($22.93) in late afternoon trading in Madrid amid the escalating dispute and a widespread sell-off for Spain's benchmark Ibex index - though Repsol told Spanish security regulators that it had so far not received any official notice from Argentina of its plans for YPF.
Repsol made the announcement just hours after Argentine President Cristina Fernandez met with top key members of her government to consider her government's next move. Fernandez' administration has accused YPF of paying out too much in profits and not investing enough in exploration and production.
Spain's government has warned that any "hostile gestures" against Spanish companies doing business abroad would be seen by Madrid as an act of aggression. Fernandez responded late Thursday that she was "ready to pay all the prices that must be paid" to continue support for her model of growth in Argentina - but did not directly refer to the Repsol dispute.
YPF is Argentina's biggest company, and Spain is the largest foreign investor in Argentina, ahead of the United States in second place.
How Argentina may try to displace Repsol, which owns 57 percent of YPF, has been the subject of wide speculation since the government's pressure campaign began in February. In recent weeks, governors of oil-producing provinces have withdrawn a growing number of its oil and gas leases, alleging the company failed to keep its promises to develop them.
Repsol president Antonio Brufau met Thursday with Argentine Planning Minister Julio de Vido, presenting a detailed plan to expand its investments in Argentina, but de Vido rejected it as insufficient, according to a report by the local Diarios y Noticias news agency.
The agency also said it had obtained a draft copy of a law to be proposed by the Fernandez government that would declare 50.1 percent of the company's shares to be "a public good" subject to government expropriation and control.
YPF spokesman Sergio Resumil told The Associated Press that he wasn't aware of what transpired during the meeting between Brufau and de Vido. Neither side made any public statement about it or the reported plan to expropriate a controlling number of the company's shares.
Argentine Cabinet chief Juan Manuel Abal Medina said last month that "if the only way forward is to nationalize YPF, it will be nationalized."
De Vido met Thursday evening with the 10 governors of Argentina's oil-producing provinces, who have a considerable degree of power over mineral resources. Then the oil group met with Fernandez herself.
Jujuy Gov. Eduardo Fellner said afterward that they "analyzed in depth" the revocation of the YPF leases, the state news agency Telam reported. Fellner denied they discussed a government takeover, the report said.
The European Union has taken Spain's side in the dispute. Olivier Bailly, spokesman for the European Commission, the EU's executive, told reporters that the commission hopes Argentina shows respect for "international engagements on the treatment and the protection of international investments on its territory."
"We stand side-by-side with Spain in this situation," he added.
Bailly added that Argentina and Spain must forge a solution over YPF that does not "damage the working environment and economic relations between the European Union and Argentina."
The Commission is responsible for helping EU member states protect their investments abroad, although the current accord between the EU and Mercosur, the regional trade bloc of which Argentina is a member, does not have any specific provisions on investments.
Bailly declined to say what instruments would be at the Commission's disposal if Argentina does decide to nationalize Repsol's stake in YPF.
"We are not at a point where we would use instruments against a decision that hasn't been taken yet," he said.
While Repsol shares fell, speculation about the possibility of a re-nationalization of the formerly state-owned company drove YPF stock up sharply. YPF shares trading in Buenos Aires closed up 7.4 percent Thursday at 123 pesos, and YPF closed up 8.6 percent at $22.93 in New York.
Michael Warren and Almudena Calatrava in Buenos Aires and Gabriele Steinhauser in Brussels contributed to this report.