Image caption YPF announced a huge shale oil find in Argentina last November

Spain has threatened retaliation against Argentina over the forced nationalisation of oil firm YPF, raising the prospects of a trade war between the nations.

YPF's controlling stake, owned by Spain's Repsol, was seized by President Cristina Fernandez's government.

Spain's Industry Minister Jose Manuel Soria said it was considering unspecified action on diplomacy, trade, industry and energy.

YPF's debt was also downgraded.

Ratings agency Moody's cut the oil firm's debt rating to B3 from Ba3, saying further downgrades were possible.

Shares in YPF fell by 30% on Wednesday in New York after trading in the group had been suspended for a day and a half.

It means the firm has lost some 70% of its share value since its peak in late January.

'Not unpunished'

Argentina has taken 51% of YPF, wiping out Repsol's 57.4% majority stake.

Repsol executive chairman Antonio Brufau said Argentina's move "will not remain unpunished" and it will seek $10.5bn in compensation.

The authorities in Argentina have accused YPF of not investing enough to increase output from its oil fields, and so lessen the need for imports, an accusation it rejects.

Nationalising YPF Spain's Repsol has hitherto owned 57.4% of shares with 25.5% belonging to Argentina's Petersen, 0.02% to the Argentine government and 17% traded on stock exchanges

The Argentine government proposes to seize 51% of the shares, all of which will be taken from Repsol's stake, leaving the Spanish firm with 6.4%

The expropriated shares will in turn be divided between the Argentine government and provincial governors

Following the expropriation, Petersen will retain its 25.5% stake and 17% of the shares will continue to be traded

The company has been stripped of a number of leases, including in some of the biggest oil fields in the country.

In November last year, YPF, which was privatised in 1993, announced a major find of one billion barrels of shale oil.

Argentina has some of the world's largest reserves of shale oil and gas.

Separately, a Chinese news report suggested China's state-owned oil giant Sinopec had wanted to buy YPF.

Caixin.com cited a banker as saying Sinopec had reached an agreement to buy the oil company , but said it was unlikely to happen now.

"To me it looks like political suicide to now allow a Chinese company to own YPF soon after announcing the nationalisation," the banker was quoted as saying.

He questioned whether they could "flip-flop like that".

It comes after a Spanish newspaper reported in April that Chinese rival CNOOC planned to buy YPF for 9.16bn euros ($12bn; £7.4bn).