Did oil have a role to play in the Falklands conflict?

There was reportedly interest in the islands’ potential geological riches from the late 1960s

British Royal Navy personnel mark the 40th anniversary of the Falklands war at the Falklands Gardens memorial in southern England. AP
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Forty years ago on Tuesday, the Argentinian garrison of Port Stanley, capital of the Falkland Islands, surrendered to British forces, bringing a 10-week war to an end.

Conspiracy theorists love to look for valuable minerals under any conflict. The Falklands war was not about oil, but oil was not absent.

The remote South Atlantic archipelago, which had a population of fewer than 2,000 on the land area of Qatar, was under British rule in 1982. Argentina claimed sovereignty over the territory it calls Las Malvinas in a dispute that started in 1820.

The Conservative government of the then UK prime minister Margaret Thatcher and its Labour predecessor had sought to resolve the status of the Falklands, but the proposed compromises were acceptable neither in Buenos Aires nor in Port Stanley. The islanders overwhelmingly considered themselves British.

The unpopular military junta in Buenos Aires thought a quick strike to take the islands would distract the population from economic and human rights problems at home, believing that Britain was neither willing nor able to recapture the remote territory.

But the UK government was wary of a public outcry if it surrendered the islands without a fight. It was cautious, too, of implications for other British outposts such as Hong Kong, which, along with China, was Thatcher’s first major overseas visit after the conflict.

File photo dated 04/06/82 of British paratroopers carrying out emergency medical treatment on wounded comrades while under fire on Mount Longdon during the Falklands war.

An aspect less remarked upon, but also important, was the prospect for oil.

There was interest in the islands’ potential geological riches from the late 1960s, according to Grace Livingstone from the University of Cambridge.

Oil prices in 1982 were still at near-record levels and all western governments remained acutely sensitive to energy security. Joint exploration had been proposed to Argentina in the 1970s, but was not acceptable as long as the sovereignty question remained unresolved.

Thatcher, therefore, resolved to send a British task force, which eventually defeated the occupiers, with more than 900 killed across the two sides.

The discredited dictatorship collapsed in 1983, and Argentina returned to a democracy. The country, however, maintains its claim to the Malvinas, with strong popular support.

The Thatcher government had been struggling with record unemployment and high interest rates imposed to bring down rampant inflation, which was spurred by the 1970s oil crises. The year after the war, buoyed by military success, the Conservatives won a crushing victory over a split Labour party and went on to a further 14 years in power.

North Sea oil and gas helped underpin an economic boom and wipe out the political power of the coal miners’ unions following the bitter strike of 1984-1985.

The Thatcher government privatised national oil company Britoil in November 1982 and completed the sale of its majority stake in BP by 1987.

These were harbingers of a wave of privatisation, market liberalisation and deregulation throughout the western world.

Following the war, the idea of commencing oil exploration around the Falklands remained too provocative, and the price crash in 1986 removed the immediate incentive.

Finally, in 1996, seven exploration licences were awarded to companies including Shell and others. But six exploration wells yielded no commercial finds and activity dried up after oil prices slumped again in 1998.

Although Buenos Aires and London restored diplomatic relations in 1990, and a joint exploration area was agreed in 1995, big companies remained wary of working in the disputed territory. This is a familiar problem that has put off major firms in areas such as the Kurdistan region of Iraq, Somaliland and the South China Sea.

Last year, Shell and BP picked up exploration rights off the Argentine coast instead, which would rule out any return. Shell also produces from Argentina’s Vaca Muerta shale resource, one of the world’s most promising outside the US.

In 2015, Argentina launched legal action against smaller corporations exploring the offshore Falklands, threatening 15-year prison sentences for their executives.

Nevertheless, they enjoyed some success, most notably the 2010 discovery of the Sea Lion field, with a sizeable resource of more than 500 million barrels. This, and some smaller discoveries, justified the geological optimism of the 1970s.

Dozens of people demonstrate outside the British embassy in Buenos Aires during the 40th anniversary of the Falklands war. EPA

However, the significant water depth, tough climate, remote area and the political impossibility of using mainland South America as a base, all deterred development.

British company Harbour Energy pulled out of Sea Lion last year, but the steep rise in oil prices since then, and the entry of Israeli company Navitas Petroleum into the project in April, might finally result in first oil from the Falklands.

It is assumed — but not confirmed officially — that revenue would accrue to Port Stanley and not to the Exchequer in London. Production would not be huge on a world scale, but it would be transformational for the tiny population, now numbering about 3,200, freeing them from economic reliance on fishing licences and British defence spending.

It would also bring with it great social change and disruption, as well as risks to the rich and fragile local environment.

In 2009, former Venezuelan autocrat Hugo Chávez gave the then US president Barack Obama a copy of the 1971 book Open Veins of Latin America: Five Centuries of the Pillage of a Continent by Uruguayan journalist Eduardo Galeano, which blames colonial exploitation for Latin America’s poverty.

Ironically, the book had been banned by the Argentinian military government. Yet the prospect of petroleum exploitation has continued to bolster a narrative in Argentina that the British government remains interested in the Malvinas only for their natural resources, although not a drop has emerged four decades after the war.

Climate policy and decarbonisation might eventually eliminate the hydrocarbon salience of the Falklands and similar areas. But other minerals and renewable energy will succeed them. Nationalism and aspirations for self-determination are more enduring resources than petroleum.

Robin M Mills is the chief executive of Qamar Energy and author of The Myth of the Oil Crisis

Updated: June 13, 2022, 5:30 AM