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The short war over the Falkland Islands between Great Britain and Argentina dates back more than 25 years. After that they seemed to have arranged themselves. But since a few weeks it is over with the calm. On Falkland an oil rush broke out.

Normally life on Falkland goes a leisurely pace. The archipelago, a patch of land in the South Atlantic, lies 500 miles off the Argentine coast, and its 2500 inhabitants live from fishing, sheep farming and a little tourism. The rest of the world knows Falkland mainly because of the short war that Great Britain and Argentina waged around the islands in spring 1982. About 900 soldiers died at that time. To this day, the victorious British maintain a military base on Falkland. They seemed to have arranged themselves.

But since a few weeks it is over with the calm on the Malvinas, as the Argentinians call the islands until today. An oil rush has broken out on Falkland. More than ten years after the last unsuccessful drillings British oil companies are on the search for the black gold again. Next week an oil platform is to reach its position north of the islands and quickly begin drilling. Their arrival awakens the spirits of the past.

Argentinians regard Great Britain as “occupying power”

More than a quarter of a century after the surprising attack on Falkland by the then Argentine military junta, the diplomatic climate between Britain and Argentina has become icy again. The still unresolved conflict over sovereignty over the islands has broken out again. The Argentinians regard Great Britain as an “occupying power” and the oil drilling by British companies as a violation of international law. “The exploration of oil off the Malvinas is attacking our sovereignty,” says Fabiana Ríos, governor of Tierra del Fuego, whose territory, according to Argentine law, includes the islands. The British government, on the other hand, regards Falkland as part of its overseas territories and wipes the objections aside.

But it does not remain only with biting remarks. On Wednesday the Argentine authorities detained a cargo ship in the port of Campana on the grounds that it had illegally transported equipment for oil exploration on Falkland. The shipping company denies this. Argentine opposition politicians also demand that Barclay’s major British bank withdraw government orders because it is involved in one of the oil companies active in Falkland. Meanwhile, British Foreign Secretary David Miliband is trying to smooth the waves. There are many more common interests than disagreements between the two countries, Miliband said this week.

The tone is shrill. The British newspaper “Financial Times” is already discussing the pros and cons of a new war. The probability that Argentina would attack Falkland like in 1982 is low, the serious business paper quotes British diplomats and informs its readers about the current military clout of the British on the ground: “Four Eurofighter fighters, at least two warships and a permanently stationed infantry company”. In Argentina, the military simulation games provide a shake of the head.

Test drillings have yet to bring clarity

Are the turmoil around Falkland a storm in a water glass or the beginning of a dangerous escalation? Much will depend on whether oil wells and wealth really begin to flow off the coast of the archipelago. Desire Petroleum, one of the companies involved, estimates that the geological oil reserves in the north of Falkland alone amount to 3.5 billion barrels.

That would be more than the entire British reserves in the North Sea. The wells off Falkland therefore also have an energy policy value for London in times of growing dependence on foreign oil. Whether commercially viable deposits can really be found remains to be seen from the test drillings that are now pending.

At any rate, the stock market is betting on success. Desire Petroleum’s share price has more than tripled since last spring. The company name is reminiscent of the British ship Desire, which Falkland discovered in 1592. The company, whose only business activity is oil exploration off Falkland, is currently valued at almost 350 million pounds on the stock exchange. Desire partner Rockhopper’s listing has risen similarly recently. Both shares are gambling stocks, which are traded in the London small value segment AIM.

Phyllis Rendell, the government director responsible for raw materials on Falkland, is trying to dampen hopes for a quick success. “It is very likely that there will be no commercial discoveries at this stage of drilling,” says Rendell.

Attempts to tap the oil wells suspected under the seabed have been made before. The British-Dutch oil company Shell, which is a giant among oil companies compared to Desire and Rockhopper, drilled test wells off Falkland in the late 1990s, but quickly lost interest. Shell returned its licences.

In 1998, the price of oil had temporarily fallen below 10 dollars per barrel, making the search for new sources economically unattractive. Today, however, a barrel price of more than 70 dollars has lured the oil seekers back to the north coast of Falkland. Phyllis Rendel points out that oil deposits are also suspected in the south and east of the islands. “Not all our eggs are in one basket,” says Rendell.