MercoPress. South Atlantic News Agency

Argentina/Chile “relations of trust” badly damaged

Chilean president Michelle Bachelet in a letter sent to her counterpart Nestor Kirchner complained that Argentina's decision to sharply increase the price of natural gas it sells to Chile had badly damaged the “relations of trust” between the two countries.

In the letter delivered Friday in Buenos Aires by Chilean ambassador Luis Maira, Bachelet said Chile is prepared to continue to work in "common tasks" with Argentina but "hard work will be needed to restore relations of trust and the strategic relationship" between the two neighbors.

Bachelet expresses her "disappointment" at Argentina's attitude regarding the supply and price structure of natural gas provision.

Chile imports between 12/15 million cubic metres of natural gas daily and Argentina last Monday raised the price to between 4.40 and 4.80 US dollars per million British thermal unit, up from 2.50 and 2.80 US dollars.

Argentina ordered the price increase in response to a similar increase in the price that it pays for gas imported from Bolivia, which nationalized its natural gas industry May 1. Argentine officials said they were simply passing on the Bolivian price increase.

But Argentina announced the increase just three days after Bachelet discussed the subject with Argentine President Nestor Kirchner during the recent summit of Mercosur in Cordoba. Bachelet revealed that the price increase was not in line with what they had discussed.

"We have indicated that disappointment exists in Chile in the wake of what has happened, which is not in line with the strategic relationship that has prevailed through several governments of Chile and Argentina" said Bachelet.

Argentina, Chile's main supplier, has repeatedly reduced or suspended the supply of natural gas to Chile in recent years; steps Chile says violate agreements between the two countries. The Kirchner administration argues it is entitled to privilege domestic demand above export contracts.

Furthermore Kirchner has ordered an additional tax on gasoline sold to vehicles with Chilean license plates in border towns, which Bachelet described as discriminatory and contrary to Latin American integration efforts.