Bolivian President Evo Morales faced international criticism on Tuesday for his decision to nationalize the country's natural gas fields. Reaction was immediate, with German Foreign Minister Frank-Walter Steinmeier warning that the move could hurt foreign investment in Bolivia, and neighboring Brazil, one of Bolivia's main gas customers, calling the move an "unfriendly gesture."

Left-winger Morales, the first president in Bolivian history from the country's Indio ethnic majority, was elected last December on his pledge to exert more state control over natural resources in Bolivia, which is South America's poorest nation but has the region's second-largest natural gas reserves after Venezuela.

He chose May 1, Labor Day, to announce the nationalization under which companies will have to leave Bolivia unless they sign contracts within six months recognizing state control. The move reflected increasing opposition to free markets and foreign business interests in Latin America. "The looting by the foreign companies has ended," Morales said in a speech from the San Alberto gas field in Santa Cruz operated by Brazil's state-owned Petrobras together with Spain's Repsol and France's Total.

"This is just the start ... tomorrow or the day after it will be mining, then the forestry sector, and eventually all the natural resources for which our ancestors fought," Morales then told a jubilant crowd in the main plaza of La Paz, the capital.

He ordered the army and "battalions of engineers" to occupy energy fields. Officials from state energy company YPFB and the military took control of dozens of installations, including gas fields, pipelines and refineries. The government said it would guarantee production and exports.

Morales had long pledged to nationalize the sector but said repeatedly he would not expropriate companies' assets. He seems to have changed his mind. The government decree says "the state recovers ownership, possession and total and absolute control" of hydrocarbons.

This means the state will own and sell these resources, relegating foreign companies to operators. Previously, Bolivian law said the state no longer owned the gas once companies extracted it from underground. YPFB will pay foreign companies for their services, offering about 50 percent of the value of production, although the decree indicated that companies at the country's two largest gas fields would get just 18 percent.

The main investors in Bolivia's gas industry include Petrobras -- which controls more than 45 percent of Bolivia's gas fields -- Spains's Repsol YPF, France's Total and British gas and oil producer BG Group Plc. YPFB alone cannot finance the development of gas fields.

Share prices fall

Spain's foreign ministry said on Monday it was deeply concerned about Bolivia's actions. Repsol said it was too early to evaluate the decree and a Total spokeswoman said the same.

Brazil, which together with Argentina is the main importer of Bolivian gas, described the nationalization as an "unfriendly gesture." Brazil's mining and energy minister Silas Rondeau told the newspaper Folha that the move could be seen as a breach of previous agreements with the Bolivian government. Until now, Petrobas has controlled 14.5% of Bolivia's gas reserves and has made substantial investments in the country.

German Foreign Minister Frank-Walter Steinmeier, speaking in Chile during a tour of South America, said the move wasn't good for Bolivia's economic relations with its neighbours and with Europe. "Some investors will definitely be careful before they expand their economic relations in Bolivia's direction," he told reporters.

Foreign companies have invested more than $3 billion in the last decade, much of it in exploration. The announcement pushed down the share prices of Total and Repsol by 2 percent in London trading on Tuesday. Britain's BG Group was little changed.

Fresh investment in Bolivia has already stalled amid political turmoil that toppled two governments in as many years.

Spain's conservative newspaper ABC condemned the nationalization in its editorial on Tuesday: "Before he took office Bolivian President Evo Morales promised foreign companies that they had nothing to fear from him. Now the former leader of coca planters has shed his mask. By nationalizing the gas and oil industry he has shown who he really is -- a left-wing extremist and a bad sign for progress and freedom in Latin America."