Spain denounced the "hostile" decision by Argentina to nationalise Spanish-owned oil company YPF, a subsidiary of Repsol, and warned Monday that it would take "clear and forceful measures" in response.
Argentina's decision had "broken the climate of friendship" between the two countries, Foreign Minister Jose Manuel Garcia Margallo told journalists, speaking after a crisis cabinet meeting called by Prime Minister Mariano Rajoy.
The government strongly "condemns... the decision to expropriate" a controlling stake in the Repsol subsidiary, he added.
"It's a hostile decision against Repsol, thus against a Spanish business, and thus against Spain," said Industry Minister Jose Manuel Soria, speaking at the same news conference.
"The government is announcing that it will take all the measures it considers appropriate to defend the legitimate interests of Repsol and of all Spanish businesses abroad," he added.
The company itself said in a statement Monday: "Repsol considers that the measure announced is manifestly illegal and gravely discriminatory...", and rejected the Argentine argument that it had been done in the public interest.
The company promised to take all the necessary legal measures to protect its interests and those of its shareholders.
Argentina said Monday it would expropriate the country's biggest oil company, YPF, controlled by Repsol, allocating a 51-percent stake to the state and to Argentina's oil-producing provinces.
Argentine authorities accuse Repsol YPF of failing to meet commitments linked to oil-drilling in the country.
YPF oil concessions had previously been revoked by 16 provinces, on the grounds that the company was not meeting its investment obligations.
Kirchner has pressured the oil companies operating in Argentina to increase production, after the country's bill for oil imports shot up 110 percent last year to $9.4 billion.
Spain and the European Union last week warned that Argentina would damage relations with them if it went ahead and nationalised YPF.
"We will be accompanied, as we already are by our European partners... and also our partners elsewhere," Cospedal said, without elaborating.
Last Friday, Margallo had warned Argentina against "aggression" in the Repsol case.© ANP/AFP