In April 2012, the Argentine government nationalized 51% of YPF — the country's largest oil company, previously owned by Spain's Repsol. In the weeks before the announcement, government officials publicly attacked Repsol's management and investment levels, driving YPF's share price down more than 50%. Then they seized the shares at the depressed price and called it fair compensation.

Repsol's loss was approximately $5 billion. The legal fight took years. The message was immediate: in some countries, the government can take your assets, set the price, and dare you to sue in their courts.

This is expropriation risk — the extreme tail of geopolitical risk. Source: Seven Pillars Institute case study on YPF nationalization; Baker Institute resource nationalism paper. Aswath Damodaran of NYU Stern maintains the most widely cited dataset on country risk premiums.

His methodology starts with the implied equity risk premium for the S&P 500 (approximately 4.3-4.5% as of January 2025), then adds a country-specific premium derived from sovereign default spreads scaled by relative equity-market volatility.