The big news last week from the Summit of the Americas was the Secret Service sex scandal, which had some in the Obama administration lamenting that no one paid much attention to Barack Obama’s efforts in Cartagena, Colombia to improve relations between the US and its allies.  Today, the White House might be hoping for a little more attention to the scandal.  After punting on an opportunity to defend the UK and the principle of self-determination over the Falkland Islands dispute with Argentina, Obama and his team got caught flat-footed by the nationalization of a Spanish oil company by Argentina’s government:

When Argentine President Cristina Fernández de Kirchner abruptly left the Summit of the Americas, it was reported that she did so over the lack of support for her country’s claim to the British-controlled Falkland Islands.

Yesterday, President Kirchner revealed another reason she returned to Buenos Aires: to announce the nationalization of the Argentine oil company, YPF, whose majority stakeholder is the Spanish energy firm, Repsol.  The move has infuriated Repsol and Spanish officials, and raised concerns that this may be the first of many expropriations of privately run companies inArgentina, putting the government on the path toward aHugo Chávez-type model of state control over key resources.

“Once you start expropriating you don’t know where it will stop,” says Boris Segura, an analyst at the New York investment bank Nomura.  “Mrs. Kirchner is now running close to Mr. Chávez’s model,” Segura says.

The EU is furious, although temporarily non-plussed:

Argentina’s move to seize the controlling share of the YPF oil company owned by Spain’s Repsol brought swift condemnation from the European Union on behalf of its aggrieved member state.

Senior officials, including José Manuel Barroso, the European Commission president, expressed deep disappointment and aides insisted that “all possible options” were being studied. The bloc’s foreign ministers will discuss the issue at a meeting on Monday.

But EU officials and trade analysts believe the bloc’s options may be limited, despite the growing clamour from the continent’s corporate sector and some politicians to defend one of its companies against a hostile foreign government.

World Trade Organisation rules do not cover investment disputes, closing off one possible avenue. Other possibilities, such as raising tariffs on Argentinian goods, could backfire, according to Fredrik Erixon, director of the European Centre for International Political Economy think-tank.

Well, thank goodness we had the American President on the ground at the Summit of the Americas.  That gave us an advantage over the EU, and prepared us for this move by Kirchner … right?  Er … not exactly, as Investors Business Daily reports:

After a weekend of cavorting in Colombia, the White House was caught flat-footed by Argentina’s takeover of a big oil company whose loss will hike gas prices, harm Spain and slam U.S. investors. Lucky us.

Never was a response to a global outrage more mealy-mouthed than the one from the U.S. after Argentina’s President Cristina Fernandez de Kirchner, standing under a portrait of Evita Peron, announced a brazen grab for YPF, the Argentine oil company that’s 57% owned by Spain’s Repsol.

Markets fell, world leaders denounced the violation of contracts and economically battered Spain rallied European Union support.

But the U.S.? “We are following developments on this issue. We are not currently aware of any WTO complaints related to this issue,” the State Department said.

Then, leading from behind after Spain vowed a “forceful” response, Secretary of State Hillary Clinton tried to toughen up: “Having an open market is a preferable model. Models that include competition and market access have been the most successful around the world.”

Wow!  That’s telling the Argentines, Secretary Clinton.  Next up, we can discuss further how to hand over the Maldives, er, Malvinas.

The seizure came as China was about to bid on Repsol, which means they may want to get involved in the dispute, too:

Argentina’s move to nationalize local oil company YPF (YPFD.BA), controlled by Spain’s Repsol (REP.MC), has spoiled years of planning by China’s Sinopec Group to buy the South American company, sources said.

Bankers said China’s second-largest oil company had held talks with Repsol to buy its controlling 57-percent stake in YPF. Chinese website Caixin.com cited a source as saying Sinopec had reached a non-binding agreement to take over YPF for more than $15 billion.

But plans by Argentine President Cristina Fernandez to seize control of YPF, which have incensed Spain and sparked international criticism, have killed any hopes that state-owned China Petrochemical Corp (Sinopec) could seal a deal, they said.

That may not be entirely bad news for the US, but the eruption of nationalization in yet another South American oil-producing nation certainly is.  And so is the cluelessness that surrounds Obama and his foreign-policy team for their lack of response to the event.

Update: The Guardian reports that Repsol execs in Buenos Aires were also caught by surprise:

Even as president Cristina Fernández de Kirchner announced on TV her plan to nationalise Spanish-owned YPF, her emissaries were at the oilcompany’s 35-storey Buenos Aires headquarters giving its Spanish directors 15 minutes to leave the building.

The Falklands might be next:

Renationalisation is aligned in the minds of Fernández supporters with the renewed demand for sovereignty over the Falkland Islands in the South Atlantic claimed by Argentina as “Las Malvinas”.

“The Malvinas are Argentine, so is YPF,” say posters around the country and a T-shirt that artists who support Fernández have started wearing on internet campaigns in favour of the takeover. “This ends five centuries of white Spanish domination,” said a supporter. Argentina was ruled by Spain until  its independence in 1816.

But the big question remains: are the Maldives Argentine?