Friday, June 18, 2010

British firms could be hit in revenge for Falklands oil drilling

By Damien McElroy, Foreign Affairs Correspondent Published: 6:28PM GMT 19 Feb 2010

Previous of Images Next The North Sea oil rig Ocean Guardian The North Sea oil rig Ocean Guardian finally arrived in Falklands waters on Friday in defiance of the warnings from the Argentine authorities Photo: C4 Britain has rejected an attempt by Argentina to effectively blockade the Falkland Island Britain has rejected an attempt by Argentina to effectively blockade the Falkland Island Photo: PA

HSBC and Barclays are thought to be on a list of companies that could be hit in revenge for the exploration, which Buenos Aires claims is a "violation of sovereignty".

The companies could find themselves frozen out of business deals in Argentina or find their dealings being blocked or hampered.

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The threat is the latest act in a dispute over plans to begin exploring for oil near the British territories. The North Sea oil rig Ocean Guardian finally arrived in Falklands waters on Friday in defiance of the warnings from the Argentine authorities.

Royal Navy ships have already been put on standby to protect commercial shipping heading to the region after Argentina said all vessels passing through its waters would have to apply for a permit. The authorities stopped a shipment of pipes bound for the island last week.

British companies identified as beneficiaries of investments in Falklands oil include Barclays, HSBC and BHP Billiton, the mining house that has an investment in Falkland Oil and Gas and copper rights in Argentina.

The banks have been targeted even though each maintains relatively minor links with two of the exploration companies. A division of Barclays holds Desire Petroleum and Borders & Southern Petroleum shares in trust, while HSBC advises Rockhopper Exploration.

Barclays is thought to be particularly vulnerable to pressure as it is playing a leading role in negotiations on Argentinas £65 billion in defaulted debt.

The new threat came as Argentina accused Britain of raising the "spectre of war" for saying preparations had been made to protect the islands.

Victorio Taccetti, Argentinas deputy foreign minister, said war was not an option in resolving the dispute over the oil-rich area.

"War is excluded from our horizon," he said. Island residents "should not be worried about this, but they should clearly know that Argentina will not abandon" its claim.

On Thursday, Gordon Brown said Britain had made "all the preparations" to ensure the Falklands were "properly protected".

Jorge Taiana, Argentinas foreign minister, is scheduled to discuss the dispute with Ban Ki-moon, the United Nations secretary-general, next week.

A Foreign Office spokesman said: "We have no doubt about our sovereignty over the Falkland Islands and were clear that the Falkland Islands government is entitled to develop a hydrocarbons industry within its waters.

"The Falkland Islands territorial waters are controlled by the islands authorities.

"Were monitoring the situation closely, but were not going to react to every development in Argentina. We remain focused on supporting the Falkland Islands government in developing legitimate business in its territory."

British officials fear that the issue will continue to fester in the run-up to Argentinas presidential elections next year.

Falkland authorities separately denounced the Argentine government in statement on the islands website.

"This is a move by Argentina to try and disrupt the oil drilling due to start early next week," said the statement. "All the supplies the industry needs are located here in the islands and drilling will commence as planned, weather permitting. [We have] every right to develop a hydrocarbons industry within our waters.

"It is no surprise to anyone that Argentina is behaving in this way but it is nonetheless disappointing when they do."

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