Black Gold, Old Rivalry: Argentina, Britain & The Falkland Islands

For isolated islands in the South Atlantic, the Falkland Islands are a sought after commodity. Known as the Malvinas to Argentina, an economic battle is brewing over oil drilling.

The Falkland Islands are a remote archipelago situated about 580 kilometers off the Patagonian (Argentina coast, a small set of islands that are a continual source of rivalry between Argentina and Great Britain. Considering the bloody history of war, and constant saber-rattling between the transatlantic nations, it is no surprise that a recent discovery of oil and natural gas resources near the Islands has stirred up some old feelings.

The potential multi-billion dollar oil and natural gas industry could potentially transform the sparsely populated island territory of the United Kingdom of slightly less than 3,000 inhabitants into one of the wealthiest communities on the planet; though the Argentine government seems bent on preventing that from happening.

An Affront To Argentina

Argentina claims that drilling in the region is a provocative affront to Argentine ownership of the islands they refer to as Las Malvinas. Their congress recently passed a law threatening jail time and stiff fines to oil executives who's companies explore the Falkland Islands without prior permission from the Argentine government. The law has already deterred oil giants such as BP and Chevron from staking claims; however, this has not prevented smaller, British owned firms from carving up the region in preparation for drilling.

Taking their fight even further, the Argentine government followed through with a threat to sue three British oil exploration firms accused of operating in Argentine territory. Despite being almost 13,000 Kilometers from England, Her Majesty’s government claims the contested waters to be British territory.

The Falkland Islands Government (FIG) countered the Argentine claims, issuing a statement on April 17th 2015, denying that oil exploration drilling is a provocation, and that the FIG will continue to exercise its right to develop its economy. They insisted that hydrocarbons are part of this industry, noting lost opportunities the Argentines didn't take advantage of, “It is worth remembering that it was the Government of Argentina who walked away from working with the Falkland Islands on the development of hydrocarbons industry some years ago.”

The FIG statement continued in its dispute against criticisms made by the Argentine government in regards to British military forces stationed on the Falkland Islands, claiming,”UK forces are here as a deterrent and levels of personnel over the past 10-15 years have reduced considerably.”

War Belongs in the Past

In a London press conference, Argentine secretary of state for the Falkland Islands, Daniel Filmus mentioned that Argentina would include two U.S. oil companies in the litigation against the three British exploration firms; Premier Oil, Falkland Oil and Gas, and Rockhopper. Argentina will employ both domestic and international law in the extension of legal action, Filmus added.

Filmus, at the London press conference said that military engagement, “belongs to the past” claiming, “The United Kingdom can count on Argentina as an ally.” However, “The [...] appropriation of non-renewable natural resources that is being carried out by the UK in the South Atlantic has been the subject of continued protest by the Argentine Republic. Argentina has been forced to resort to defensive measures.” Filmus added, “law and political action [are Argentinas] main tools in order to protect the natural resources in the area under dispute.”

This development isn't overly surprising as it happened to coincide with an election campaign in Argentina, as well as a recent elections in the U.K. which will make for interesting developments on the political front in the coming years. Fortunately war is off the table for the near future, but is difficult to say what will come of this territorial skirmish inflamed by the discovery of vast natural resources, which could alter the economic fortunes of whoever succeeds in exploiting them.

U.K. Conservatives Antagonize Argentina for Political Gain

In the May 2015 election in the UK, Prime Minister David Cameron and his conservative party surprised voters after winning an “absolute majority”. The conservative triumph forced the leaders of the largest losing parties into resignation, Nigel Farage of UKIP, Nick Clegg of the Liberal Democratic Party, and Ed Miliband of the Labour Party.

Prime Minister Cameron’s Defense Secretary Michael Fallon, told law makers in March, two months before the elections, that the British government plans to augment the number of troops stationed in the Falkland Islands in order to ensure their protection from Argentine invasion. This was contrary to the FIG statement made later in April.

“They are provoking Argentina, hoping that the country reacts in order to strengthen nationalist feelings … thinking that it will favour them in their election,” Daniel Filmus said in an interview.

"Further, this sort of rabble-rousing in an attempt to rouse nationalistic fervour for electoral purposes is characteristic of right-wing movements everywhere, and in this case", according to unnamed Argentine officials in communication with Reuters, "remarks from the British government concerning the Argentine threat are unfounded."

The British victory in the Falkland Islands in 1982 under the leadership of Conservative Prime Minister Margaret Thatcher, which helped facilitate Thatcher’s reelection, so traditionally the Falkland Islands have been exploited as a means of political gain by the conservative party in the past.

The British government claims it plans on renovating communication systems as well as sending two Chinook helicopters to the contested islands. “This makes no sense because no one wants to attack. And so who are they defending themselves from?” Filmus added.

News from the Oil Front

In May 2015, Rockhopper announced it would resume drilling in the Falkland Islands after an April setback. A technical issue stopped work on the Eirik Raude oil platform, which apparently has a history of malfunction, Argentina Crude reported.

Falkland Oil and Gas Limited (FOGL), issued a report in April detailing a “technical problem” sustained by the deep sea oil rig owned by Ocean Rig Management, a drilling contractor, that Argentina later claimed as an environmental hazard. The potential environmental damage, according to Argentine sources, could reach the coast of Tierra del Fuego, disrupting the surrounding ecosystem and, by extension, the commercial fishing industry.

The “illegitimate” drilling campaign which began in 2012, promoted similar issues concerning an oil well drilling on the continental shelf of the Malvinas Islands, which fortunately for anti-drilling advocates turned out to be “dry”.

Rockhpper says that the rig will be up and running by the end of May 2015, and the drilling site known as Isobel Deep, could begin to yield oil. Westinghouse Securities, an investment bank, says that it could produce 70 million barrels of crude oil, making the development of this site even more attractive to investors and oil drillers.

More in Environment