Provincial governments threaten oil supply cuts in dispute with Milei

Argentina's main petroleum-producing provinces have threatened to cut supplies to the rest of the country over funding reductions ordered by President Javier Milei.

"Not a drop of oil will come out on Wednesday if they don't respect the provinces once and for all and take their foot off our back," Chubut Province Governor Ignacio Torres told the opposition television channel C5N on Saturday.

Torres and counterparts from five other Patagonian provinces – Tierra del Fuego, Santa Cruz, Río Negro, La Pampa and Neuquén – announced Friday that "if the Economy Ministry does not deliver its [financial] resources to Chubut, then Chubut will not deliver its oil and gas."

The provincial leaders were angered by the austerity-minded Milei's insistence on withholding from Chubut some 13.5 billion pesos (US$15.3 million) in monthly transfers of federal tax revenues.

Economy Minister Luis Caputo argued on X, the former Twitter, that the cut was necessary to collect on unpaid debt from Chubut to the federal government – and that 10 other provinces also owe money.

In a message on X, Milei denounced the southern leaders as "fiscal degenerates."

But one prominent analyst and pollster, Artemio López, said Milei might have miscalculated.

"This is an unprecedented conflict due to its reach," he said. "There is a rebellion in the provinces, and a mistaken assessment by Milei about the level of conflict" the central government can engage in with various political actors.

For the president to pick a fight with a deeply unpopular Congress is one thing, López said.

"But it is not the same when confronting governors. Most of them got a higher percentage of the vote than he did in the last election."

Argentina is the world's 39th largest exporter of crude oil and the 20th largest of gas. It imports refined fuels for internal consumption.

Chubut (21.5 percent) and Neuquén (51.5 percent) accounted for three-quarters of Argentina's oil production in the second quarter of 2023.

In 2022, Argentina's energy balance recorded a deficit of US$12 billion, but the government estimates a surplus of US$3.3 billion by 2024, due to the expansion of the unconventional Patagonian Vaca Muerta field (which is spread across Neuquén, Río Negro and La Pampa).

Milei blasts Torres

Milei, who was flying Saturday to the United States to attend the Conservative Political Action Conference (CPAC) gathering to be addressed by Donald Trump, took to X – in scores of posts – to blast Torres by his nickname, denouncing "Nacho and his accomplices."

He reminded them of an article in the penal code providing for jail sentences of up to two years for anyone hindering energy supplies.

"Don't make yourself a problem, Nachito, we will solve it in court," he posted.

A statement from the president's office denounced "the waste of the provinces that refuse to reduce unnecessary expenses" and referred to the provinces' opposition as "a Chavista threat."

Hours later, Torres responded: "I hope there is a channel for dialogue. The problem is that you don't know who to talk to."

The dispute arises amid growing protests over price and fee increases as the new president promotes extensive deregulations and drastic fiscal adjustment.