Make Gas Not War

As the British question whether they could mount another Falklands war, the sabre-rattling in Buenos Aires intensifies, and spreads to the other Latin American countries.

Mercosur, the South American free trade zone, has closed its ports to ships flying the Falkland Islands flag. Now Argentine President Cristina Fernandez is accusing the British of ‘militarising the South Atlantic, one more time’. David Cameron calls the attitude of the Argentinians ‘colonialism’, but it’s not about that. This is about big business. This is about mineral extraction on a massive scale and the Argentinians are bitter that 3,000 Falkland Islanders should be entitled to the whole prize.

Taking the issue to the UN, the Argentinians wish to test international opinion. It currently doesn’t look good for the British. We consider the Americans as our closest ally, but the State Department’s comments are hardly encouraging. ‘We recognise de facto UK administration of the islands, but take no position regarding sovereignty’.

Cameron’s approach is confrontational, but the Argentine president appears to be signalling a diplomatic opportunity. ‘We cannot interpret in any other way the deployment of an ultra-modern destroyer accompanying the heir to the throne, who we would prefer to see in civilian attire.’

It may well be that diplomacy would be expensive in terms of the share of the mineral wealth that Argentina would wish to acquire, however, a perceived show of military might to impoverished Argentina is unlikely to win many friends. And since Cameron’s international development policy is to spend lavishly, while his economic policy is to engage with the BRIC countries, antagonising Brazil may be ill advised.

Then there is the practical problem of these deep-sea submerged minerals. Gas is present in far greater quantities than oil. Gas needs a pipeline to transport it, while oil can be shipped. The coastline of Argentina is 1,000s of miles long, cutting off the place of extraction from the place of delivery. The extraction companies operating in the Falklands have removed any mention of gas from their websites, as if the problem can simply be dealt with later. For now, they’ll concentrate on what oil is there.

There is no question of another Falklands war. Argentina no longer has the military means. However, these difficult to reach minerals are now being made difficult to deliver by the tactics of Argentina. Their refusal to cooperate is piling costs on this operation.

Distributing the oil and gas through Argentina would create jobs and industry for a country that desperately needs them, but the politicians of Argentina cannot lose face, and would therefore need to strike some kind of deal to give their country a share.

With possession of the islands in the hands of the British, the negotiating position of Argentina is weak, so the cost of a partnership may well be smaller than the British might expect. If Fernandez successfully pushes the issue up the UN agenda, then the eventual cost of a deal will increase. And all the time, the question of how to transport the gas will continue to vex.

However, none of these questions can be answered until an honest conversation has been had. Cameron may well be wise to engage rather than confront Argentina on this issue.

One Response to Make Gas Not War

  1. Ex-Labour says:

    “Gas needs a pipeline to transport it, while oil can be shipped. The coastline of Argentina is 1,000s of miles long, cutting off the place of extraction from the place of deliver”

    Ever heard of FLNG ? Most energy majors recognise the problem of remote operations and lack of infrastructure.

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