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Fresh tensions unsettle the Falklands

It can be somewhat disorienting to see modern nation-states once again flying the jingo flags over (relatively) insignificant specks of land. Though the last half-century has been marked by military conflicts all over the world, the fights have overwhelmingly been of a particularly one-sided sort, as major powers engaged in neo-imperialist expeditions from Central and Southeast Asia to Africa and the Middle-East.

The Falklands War or Guerra de las Malvinas of 1982 might be considered one of the exceptions. One school of thought (held largely by Argentina and its on-again off-again allies) is that the war actually was a last-gasp neo-colonialist conflict, waged by post-Imperial Britain against Third World Argentina. The other point of view, more popular in the U.K. and most of NATO, holds that it's all the South Americans' fault, as Britain legally held the islands since 1833, the residents themselves would rather stick with England and Argentina made the first aggressive move in any case.

In an era of worsening economies and straiined politics, I'm alarmed to see the rhetoric being ratcheted up over these windblown specks of rock in the South Atlantic. Predictably enough, petroleum could be at the center of the problem. The most recent escalation, as the Financial Times reports, is an Argentine-suggested ban on ships flying Falklands flags entering any of the ports of its Mercosur trade pact partners: Brazil, Uruguay and, bizarrely, landlocked Paraguay.

In addition, Argentine President Cristina Fernández de Kirchner appears to calculate, like the Argentine military junta of the '80s, that sabre-rattling and jingoism will distract people from economic problems at home. Across the ocean, England faces its own challenges with the mounting public cuts demanded by austerity and a restive citizenry which already staged one set of dramatic riots this year. Former Prime Minister Margaret Thatcher dealt with similar challenges by responding to Argentina's aggression with a massive show of force intended to rally the British Isles behind her.

In the end, 649 Argentines and 258 Britons died and nothing changed hands.

The two sides are once again casting themselves as avatars of anti-colonialism on the one hand and liberal freedom on the other, as al-Jazeera reports.

"In the 21st century, [Britain] continues to be a crass colonial power in decline, because colonialism is out of date as well as unjust," Kirchner declaimed yesterday. She also stated that the British-controlled Falklands were stealing "our oil and fishing resources."

"As long as the Falkland Islands want to be sovereign British territory, they should remain sovereign British territory - full stop, end of story," fired back Prime Minister David Cameron in a Parliament debate.

A British oil exploration firm, Rockhopper Exploration, holds several prospecting rights on the islands. It plans to start pumping oil by 2016 and reach peak production of 120,000 barrels per day two years thereafter, with development costs projected to reach $2 billion. Domestic production of oil in the U.K., primarily based in Scotland and the North Sea, has steadily declined over the last decade, and waning fields combined with higher taxes have depressed production even more recently. According to the Department of Energy and Climate Change, indigenous production of fuels in the UK slipped nearly 20 percent in Q3 2011 from the previous year. Overall, DECC figures show that the U.K. produced 438 million barrels of oil in 2010 and imported 358 million barrels while exporting 279 million barrels.

In that context, the production of an extra 43.8 million barrels of oil per year, or 10 percent of last year's production, is not insignificant. Unfortunately for the people of the Falklands, the shrinking supply of oil combined with the rising stakes of nationalism make further conflict more likely.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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