By Eliana Raszewski
BUENOS AIRES (Reuters) - The government of Argentina's libertarian President Javier Milei said on Monday a threat by oil-rich province Chubut to cut off gas and oil supplies amounted to "extortion" amid a brewing fight over tax disbursements to the Patagonian region.
The conflict started late last week when the central government held back the transfer of some 13.5 billion pesos (about $16 million) to Chubut, the country's second-largest oil region and third-largest for gas, citing debt the region owed to the Argentine state.
Chubut Governor Ignacio Torres, part of the main conservative bloc that has backed Milei, responded that the province would cut energy supply if the funds were not disbursed, a position supported by other governors in southern Argentina.
"Threatening to cut off fuel is a matter of extortion, not of the national government but the Argentine people themselves," presidential spokesman Manuel Adorni said at a press conference.
"The State is transferring everything according to the law ... What happened was that the relevant discount was made. There is nothing we have done outside of the law."
Torres, however, stuck by his threat.
"What will surely happen this Wednesday is that production will be interrupted, not only in Chubut but in all the fields in the country, because it is clear that if they can beat us, they are going after everyone," Torres said.
Milei, trying to turn around a deep fiscal deficit, a dearth of reserves and rampant inflation, has repeatedly said "there is no money" and looked to tightly squeezed state funding, including that to provincial governments.
Marcelo Rucci, general secretary of the Private Oil and Gas Union of Rio Negro, Neuquen and La Pampa, the main energy union, said the conflict must be resolved politically and added that it was not the time for halting production or supply.
Milei has said Chubut contractually must pay back its debts and that it would constitute a crime if the province failed to comply with its energy supply commitments.