Argentine demands for more lucrative terms are threatening to scuttle landlocked Paraguay's power sales to Uruguay, a significant source of revenue for the impoverished government in Asuncion.

It's the latest twist in Argentina's frequent quarrels with Paraguay and follows disputes over transshipped trade merchandise and immigration.

Paraguay last year recorded 14.5 percent growth in its gross domestic product, the highest in South America, but is hamstrung by a huge informal sector and high poverty rates among the country's overwhelming Mestizo population.

The power dispute called into question President Fernando Lugo's pledge to secure for Paraguay "energy sovereignty"-- a reference of complex power grid sharing arrangements with Argentina and Brazil, with whom it jointly operates two hydroelectric complexes in the country. Paraguay says the power grid sharing agreements don't reflect market realities.

Paraguayan officials said they were thwarted in their attempt to export surplus power to Uruguay because of unreasonable demands from Buenos Aires. Lugo's top aides met in an emergency session to discuss how to resolve the crisis, which is affecting the nation's revenue.

They said Argentina promised a positive reply at the end of May to coincide with the bicentennial of Paraguay's independence but had come up with more demands.

"Argentina has come up with demands linked to what we can describe as the toll and some other compensation which originally were not considered in the negotiations," Paraguayan Deputy Minister for Mines and Energy Emilio Buongermini said.

He said Paraguay offered to pay Argentina $10 per megawatt per hour for the use of its transmission grid for the power export to Uruguay but the offer wasn't accepted by Argentine President Cristina Fernandez.

"This is the going rate in the region and we don't see why Paraguay should pay more," Buongermini said.

Meanwhile, the planned export of surplus power to Uruguay remains suspended.

Paraguay also faced Argentine demands the surplus power didn't violate current power sharing agreements.

Argentina demanded and received assurances that the power sold to Uruguay wouldn't originate in the shared Paraguay-Argentina Yacyreta Dam complex.

Paraguay has promised and given evidence that the power would originate in its Acaray hydroelectric dam, which isn't shared with either Argentina or Brazil.

"Obviously it is difficult to identify the origin of the power, when you turn the light on you don't have a clue where the power comes from -- Yacyreta or Itaipu," Buongermini said, citing Paraguay's other major dam, which is shared with Brazil.

Paraguay has been trying to increase its foreign exchange earnings from the surplus power generated at the Yacyreta and Itaipu dams.

Lugo and his aides have been unhappy with the controlled prices, which they say are well below current market rates, which Paraguay can charge under contracts with neighbors Brazil and Argentina.

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