The presidents of Brazil, Bolivia, Venezuela and Argentina are to hold talks in the Argentinian border town of Puerto Iguazu on Thursday in an effort to resolve the crisis sparked by Bolivia’s plan to nationalise its natural gas reserves.

The meeting, called by President Luiz Inácio Lula da Silva of Brazil following an emergency meeting of cabinet ministers and industry executives, marks an attempt to find a regional diplomatic solution to Bolivia’s surprise move, which has alarmed international investors and overseas governments.

Petrobras, the Brazilian state-owned oil group, has invested about $1.5bn in Bolivia’s natural gas industry and a further $2bn on a pipeline from Bolivia that supplies half of Brazil’s natural gas consumption.

A person familiar with the situation said relations between Brazil and Bolivia remained “very complicated” but efforts were being made at all levels to reach a negotiated settlement. “The big question here is regional energy security,” the person said. “[The move] makes no sense from Bolivia’s point of view. [Bolivia] has shot itself in the foot.”

Petrobras controls reserves of 158.4bn cubic metres of natural gas in Bolivia, according to measurement criteria set by the US Securities and Exchange Commission, and its operations account for 15 per cent of Bolivia’s gross domestic product.

Bolivia’s vice-president said on Bolivian radio that Petrobras would lose around $1.5bn over a 12-year period as a result of the May 1 decree.

The invitations extended to Néstor Kirchner of Argentina and Hugo Chávez of Venezuela to join Thursday’s meeting reflect the wider political significance of Mr Morales’ decision, announced on Monday. Venezuela, Argentina and Bolivia are seen as forming a radical populist grouping in South America that contrasts with the more moderate leftwing governments of Chile and Uruguay. Brazil has sought to steer a middle course.

Outside South America, the reaction to Bolivia’s action has been more hostile. A “deeply concerned” Spain warned that nationalisation would have “consequences [for] the bilateral relationship”, a threat that could lead to the ending of debt relief.

Repsol YPF, the Spanish energy group that has invested more than $1bn in Bolivian gas production, Brazil’s Petrobras, also a big investor, and other international oil companies could be forced to write off their Bolivian gas reserves, analysts said.

Repsol has already been forced to reduce its reserves this year by a quarter because of legal changes in Latin American countries.

Reacting angrily to Mr Morales’ decision to seize control of gas fields using troops and annul existing contracts, Antonio Brufau, Repsol’s chairman, told Argentine radio: “We were told there would be time for negotiations, but obviously this was not the case.”

Anouk Honoré, natural gas analyst at the Oxford Institute for Energy Studies, added: “Bolivia has already a bad reputation among oil companies and some of them are going to leave the country.” She predicted that BG and BP of Britain would be likely walk away from Bolivia.

The European Union also noted its concern but said the country’s move would not affect European energy supplies. A European Commission spokesman said: “We had hoped there would be a process of discussion and consultation before it adopted such measures”.

Additional reporting by Thomas Catan and Javier Blas in London, Leslie Crawford in Madrid, Hal Weitzman in Lima, Elizabeth Johnson in São Paulo, Andy Webb-Vidal in Caracas and Sarah Laitner in Brussels.

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