Analysis: Above-ground risks dog Argentina

OREANDA-NEWS. February 17, 2015. A fresh political crisis that reached Argentina?s presidential palace last week augments a perception that above-ground risks are thwarting development of the country?s extensive shale resources.

An Argentinian prosecutor has formally accused President Cristina Fernandez de Kirchner of trying to cover up the alleged role of Iranian suspects in the 1994 bombing of the AMIA Jewish community center in Buenos Aires.

The 13 February accusation by prosecutor Gerardo Pollicita ensured that the case against Fernandez, her foreign minister and other officials would move forward even after AMIA special prosecutor Alberto Nisman was found dead in his apartment on 18 January.

In a 61-page filing, Pollicita said there was enough evidence to proceed with the case that Nisman unveiled four days before he died of a gunshot wound to the head. He was scheduled to go before the congress the next day to discuss his allegations of an oil-for-grains deal with Iran in exchange for impunity over the attack. The investigation into his death has not found evidence of foul play so far, but Fernandez has said she thinks he was murdered by rogue intelligence agents.

Pollicita does not mention oil in his accusation, only citing suspicion that impunity was sought in exchange for unspecified trade benefits. The government has repeatedly denied the allegations and Iran has long rejected claims that it was involved in the 1994 attack that killed 85 people.

The mystery surrounding Nisman's death has engulfed Argentina as it heads toward a general election in October. The upcoming poll is significant because it could mark the end of the Kirchner era that began with the presidency of the Nestor Kirchner, Cristina Fernandez?s late husband, in 2003. Fernandez is not eligible for a third term, although a close ally, interior and transport minister Florencio Randazzo, is running.

The Kirchner years have been characterized by government intervention across the economy. In the oil sector, this was manifested in the form of price controls from the wellhead to the pump, trade restrictions and the government?s 2012 seizure of a majority stake in the oil company YPF from Spain?s Repsol, its former controlling shareholder.

Argentina's economy has been slowing after years of growth. The International Monetary Fund estimates that Argentina's economy contracted by 1.7pc last year and will decline by 1.5pc in 2015. Oil and natural gas production have been flagging for years.

Fernandez has not spoken about the charges since 13 February, but her allies quickly labeled the prosecutor?s filing as politically motivated.

Investors often cite political uncertainty as one of the reasons why they are wary of increasing their exposure to Argentina. The possibility that the president could be questioned as a suspect, and maybe even indicted, only augments those concerns.

Argentina?s campaign to attract foreign investors to its emerging shale play has already been complicated by the plunge in oil prices since mid-2014.

The country remains largely locked out of international capital markets since its 2001 default, a situation that has only worsened after it was declared in technical default on 30 July as a result of a festering dispute with bondholders who have refused to restructure defaulted debt.