NEW YORK (Reuters) -The U.S. government sided with Argentina's effort to put on temporary hold a court order that it turn over its 51% stake in oil and gas company YPF to partially satisfy a $16.1 billion judgment won by two investors.

In a filing late Thursday night, the government told the 2nd U.S. Circuit Court of Appeals that the public interest supports resolving the dispute on the merits, "free from the rushed compulsion of an unstayed turnover order and any negative effects it may have on U.S. foreign relations with Argentina."

The investors, Petersen Energia Inversora and Eton Park Capital Management, separately urged the Manhattan-based appeals court to reject a stay of U.S. District Judge Loretta Preska's June 30 turnover order while Argentina appeals.

They said the appeal would likely fail, and Argentina's "strategy of delay and obstruction" against collecting the $16.1 billion judgment, which the country is also appealing, justified the turnover.

The investors nonetheless said if the appeals court is not inclined simply to deny a stay, it should return the case to Preska to let Argentina propose alternative collateral or set conditions to avoid "irreversible outcomes" during its appeal.

"Plaintiffs have no interest in having the shares become unrecoverable in the (unlikely) event Argentina prevails on appeal, and no interest in running an oil company, and so would accept reasonable conditions to ensure the share transfer can be easily unwound if necessary," the investors' lawyers said.

Representatives for Argentina had no immediate comment outside business hours.

Argentina has said it would suffer irreparable harm and its economy could be destabilized if it gave up its stake in YPF, the country's largest energy company.

It has until July 22 to respond to the investors' filing.

Petersen and Eton Park are represented by litigation funder Burford Capital, which has said it expected to receive 35% and 73% of their respective damages.

The litigation arose from Argentina's 2012 decision to seize the YPF stake from Spain's Repsol without making a tender offer to minority shareholders.

Preska awarded the $16.1 billion judgment in September 2023.

The U.S. government expressed its position in a proposed friend-of-the-court brief, which mirrored a position it first took last November during the Biden administration. It said Petersen and Eton Park opposed its motion to file the brief.