South Atlantic Council
Occasional Papers

No. 9

Contrasting Approaches to Relations
between the Falklands, Britain and Argentina
  Edited by Peter Willetts

February 1998

After the general election in Britain on 1 May 1997, the South Atlantic Council decided to appeal to the new Labour government to re-examine policy towards Argentina. In particular, the Council questioned the refusal of the previous government to countenance any discussion with Argentina that might be considered to affect the sovereignty of the Falklands. In contrast, the Falkland Islands Association believes there is no need to contemplate any change in the status quo and British-Argentine relations can improve on a normal diplomatic, cultural and commercial basis, without this having any bearing upon British sovereignty over the Islands. The Association welcomed the negotiation of the "diplomatic umbrella" over sovereignty agreed in Madrid in October 1989 and believes it should remain in place for the foreseeable future.

This Occasional Paper provides the text outlining the Council's initiative. It was discussed in a formal meeting of four members of the Council's Executive with Tony Lloyd, Minister of State at the Foreign and Commonwealth Office responsible for Britain's relations with Latin America. It was also presented to the Argentine Embassy and the Falkland Islands Government Office in London. The second half of this paper provides a detailed response that was sent by the Falkland Islands Association to the Council. Finally, the wording of the sovereignty umbrella is reproduced. While the layout has been standardised, the text of these three documents has not been amended in any way. Clearly, the Council would object to comments made by the Association and several rounds of exchanges could have occurred. However, readers are left to assess the basic positions of each side for themselves.

[End of p. 1]

The South Atlantic Council Initiative

The Falkland Islands: The Options for the Future*

The South Atlantic Council believes

that it is in nobody's interest that the Falklands/Malvinas dispute should continue;

that fishing, the development of oil, tourism, farming, communications and the general welfare of the inhabitants of the South-West Atlantic area can best be guaranteed by normal peaceful relations between the peoples of Argentina, the Falklands and Britain;

that it is to the advantage of each of the three parties to adjust their current positions, in order to achieve a long-term settlement of the dispute;

that a permanent peaceful settlement has to be acceptable to the peoples of Argentina, the Falklands and Britain; and

that this requires

1. the Argentine government to acknowledge the right of the Islanders to be governed in a manner that guarantees their liberties and their way of life under the law;
2. the Falkland Island Government to acknowledge the profound changes which have taken place in Argentina since 1983 and hence the possibility of establishing mutually-beneficial links between the Islands and Argentina; and
3. the British government to acknowledge that preserving the status quo does not resolve the latent dispute and consequently evolution of the sovereignty arrangements must be open for discussion.

Fifteen years after the war the moment is propitious for negotiations to begin to explore, in a creative and co-operative manner, ways of moving towards new political and legal arrangements to govern activities in the Islands and their surrounding waters. A new government in the UK, even with a crowded agenda, can fairly early in its term in office take steps towards a solution at limited political risk. In addition, the present Argentine government is disposed to find a reasonable solution and still has two more years to run. Electioneering in Argentina will begin in earnest in 1998 prior to the presidential elections in 1999. The period from mid-1997 to mid-1998 is therefore a window of opportunity.

Various considerations make a solution desirable from the British side. The maintenance of a garrison on the Islands and the logistical support–––in the Falklands, in Ascension and in Britain–––for reinforcement of the garrison are a

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* The SAC's paper was originally presented to the FCO in June 1997, in anticipation of a visit by the Foreign Minister of Argentina, Guido di Tella. When this visit was postponed, the paper was not circulated further until October 1997.

[End of p. 2]

burden for Britain's over-stretched defence capabilities. At the same time the military in Argentina has been brought under civilian control and the government has forsworn, in the constitution, the use of force to regain the Islands. However, the Argentines still feel the need for some form of acknowledgement of their long-standing claim and feel aggrieved about the obstacles to them visiting the Islands. Economic and cultural links between Britain and Argentina have grown substantially since 1990 and it is in our interests to remove any possible impediments to trade and investment. An agreed solution would provide a substantial impetus towards closer political and economic relations. While good progress has been made on a bilateral basis with co-operation over both fishing and oil, the current arrangements are not sufficient to guarantee the future of either industry nor the environmental and economic security of the Falkland Islands.

A number of possible solutions have been proposed in the past. The Council does not endorse a specific solution and recognises that at the moment none of them have the support of all three governments and peoples. However, we believe exploration of the various options could develop the necessary understanding for each side to appreciate the needs and wishes of the other two, identify the possibilities for mutual accommodation and gain the benefits of full co-operation.

It is as important to understand what is apparently unacceptable, and why, as it is to understand what is preferred by each side. In the process of discussion, seemingly insuperable contradictions may become capable of reconciliation. The following significant options should be considered, as part of a full exchange of views.

• A Permanent Umbrella: the current sovereignty umbrella would be enshrined in a bilateral treaty that provides new permanent institutions to promote co-operation.

• Independence: the Islands would become a sovereign state in their own right.

• Integration with Argentina or with Britain: the Islands would become a full and equal part of one country, forming a single constituency to elect one member of the appropriate legislature.

• Shared Sovereignty: Argentina and Britain would create joint institutions to exercise the role of the current Governor and to represent the Islands in international diplomacy. (Andorra used to be governed by a special form of shared sovereignty, between the French President and the Spanish Bishop of Urgel.)

• Greater Antarctica: the Falklands would be incorporated in the Antarctic Treaty System and provide a base to support scientific work, tourism and fishing in the Antarctic region. Sovereignty would be exercised de facto by the Antarctic Consultative Parties.

[End of p. 3]

• Autonomy: the Islanders would have complete control over all their internal affairs and all decisions that will affect their way of life, but would be an integral part of another state. The Aland Islands is an example.

• Self-Government as a Dependency: the Islands would be regarded as a separate territory and could choose to play a distinct role in international affairs, but ultimately be subject to the authority of another state. The Isle of Man, Jersey and Guernsey are currently in this position.

• Self-Government in a Free Association: the Islands would be independent and not subject to an external authority, but their foreign affairs and defence would be conducted by another country on their behalf. The Cook Islands and Niue have such a relationship with New Zealand.

• Lease-Back: title to the Islands would be transferred to Argentina and then effective control returned to Britain for a fixed time period. This was endorsed by the British and Argentine governments in the past, but rejected by the Islanders.

Some of the above options provide sharp alternatives to each other, but they are not all mutually incompatible. A simple, orthodox, exclusive view of sovereignty does not offer a plausible solution, but some form of permanent co-operative arrangements between Britain and Argentina, combined with assured self-government for the Islanders is most likely to succeed.

The Council's distinguishing characteristic is that it believes a permanent solution, acceptable to all the parties, is possible. While the Council does not endorse any specific solution, it does wish to encourage the movement of political thinking about the future of the Falkland Islands. It has worked to promote greater communication and understanding among all the parties, as a contribution towards this end. The Council's limited membership is designed to bring together interested individuals with experience of all aspects of the issue - such as oil, fish, defence, the environment, the Antarctic and diplomatic relations - and it is ready to use its varied contacts to help in the achievement of a solution.

[End of p. 4]

THE FALKLAND ISLANDS AND OIL

It has long been acknowledged that the seabed surrounding the Falkland Islands could well contain commercially viable oil and gas reserves. The Falkland Islands Government (FIG) awarded geophysical survey contracts in the early 1990s which confirmed this view. HMG and the Argentine Government then negotiated, in September 1995, a Joint Declaration providing a structure within which the exploration and exploitation of oil reserves in the South-West Atlantic could go forward. By specifically stating that the "umbrella" over sovereignty of the Islands applies to all activities concerning oil, it was possible to establish a Joint Commission to regulate the activities of oil companies in the "area of special co-operation" between the Islands and the mainland, straddling the de facto maritime boundary. The Joint Declaration also implicitly cleared the way for FIG to proceed within "its own" offshore limits.

In October 1995 FIG launched a licensing round, leading to bids and the award of licences in October 1996 to five oil groups covering seven tranches of blocks, all lying to the north of the Islands. The bidding was open to all parties, but no Argentine oil interests are directly represented in the groups being awarded the first exploration licences. Although the decision was defended in commercial terms, it was seen as being politically significant by some Argentines. No bids were received for the less attractive tranches to the south. The groups are committed to work programmes for a minimum of twelve years.

The offshore activities will require the support of significant supplies and services, from onshore sources. The business has to be open to all parties. On the mainland there already exists an established offshore oilfield supplies and services industry. FIG is also interested in offering services from the Islands. However, no requirement was made in the FIG licences for operators to obtain a proportion of their needs via the Islands, and FIG has decided against taking a positive role in the development of offshore services, preferring instead laissez faire encouragement.

The Islanders are interested in providing offshore services, but have no experience of what may be required, nor how to provide it. They invited a deputation of Aberdeen interests to the Islands (who are thought to have returned unimpressed by what they heard). Approaches to the government and the Chamber of Commerce, by very experienced consultants seeking to develop a strategy with them, have come to nothing. Ultimately the participation of the Islands in offshore services is likely to be a function of future decisions by the offshore operators as to their procurement strategies and the interest of established firms in working with the Islanders. There will, of course, be limits to what is physically and socially sustainable in the Islands.

It is generally assumed that the Argentines will share with the Islands the benefits from such offshore oil developments. Of crucial importance to the

[End of p. 5]

proposals for a more settled relationship between the Falklands and Argentina is the singular fact that such offshore oil development establishes a community of interest shared between the two parties, the exploitation of which can only further co-operation and understanding.

However, there is a major contradiction in current policy on Argentine firms. The Joint Declaration encourages companies from Britain and Argentina to co-operate, to form joint ventures and elaborate joint projects in all oil activities. At the same time, the Falklands Executive Council continues to refuse permission for Argentine personnel to land on the Islands. This is an important concern for the future.

Successful oil exploitation could provide revenues to FIG approaching £500 millions per annum, i.e. some tenfold increase over their peak revenues from fishing. Revenues of this order would allow FIG to pay in full for its own defence requirements, and to have resources with which to pursue some overseas investment policy. Given a more settled relationship with Argentina and the size of possible oilfield income, the Islanders may begin to feel more secure and hence have more confidence in engaging in discussions about their future.

[End of p. 6]

FISHING IN THE SOUTH-WEST ATLANTIC

Negotiation and ratification of the UN Convention on the Law of the Sea (UNCLOS) took twenty-two years from 1973 to 1994. Despite the wide-ranging scope of UNCLOS, it did not directly provide a regime for high-seas fishing. Technological, economic and environmental changes have made fisheries conservation a much more pressing problem than was foreseen in the 1970s. UNCLOS has two provisions that are relevant to Argentine-British relations.

Under Article 63(1), where one stock of fish occurs within the Exclusive Economic Zones (EEZ) of two or more adjacent states, they should agree on measures to manage the stock. The agreement can be either direct or through regional organisations. Thus for stocks such as Patagonian Hake and Whiting it is appropriate for Argentina and Britain to have a joint South Atlantic Fisheries Commission, under the sovereignty umbrella.

Under Article 63(2) there should also be agreement to manage stocks that occur both within an EEZ and in the waters of the high seas. The obligation here is for the coastal states and the fishing states to act collectively. At the moment the valuable stock of Illex squid, which migrates through the high seas, through the EEZ defined from the Argentine mainland and through the waters around the Falklands, is managed by the same bilateral Fisheries Commission. This is not in accord with UNCLOS Article 63(2), because the governments of fishing countries, such as Spain, Japan and Korea, are not included in the decision-making.

As a result of a Canadian initiative at the Rio Earth Summit, a special UN conference on high-seas fishing took place from 1993 to 1995 and an agreement was opened for signature on 4 December 1995. It is officially called

the Agreement for the Implementation of the Provisions of the United Nations Convention on the Law of the Sea of 10 December 1982 relating to the Conservation and Management of Straddling Fish Stocks and Highly Migratory Fish Stocks, (UN document A/CONF.164/37).

As of December 1996, this High-Seas Fishing Agreement has been signed by 43 states and the European Community. The signatories include Argentina and eleven members of the EC, (but not Belgium, Spain, Germany and France). The United Kingdom has signed, at various times, on behalf of ten colonial territories, including the Falkland Islands on 4 December 1995. The UK signed on its own behalf in June 1996, with the other EC members and the EC itself.

It will be some time before the Agreement comes into force and, when it does so, it will not necessarily have the support of Japan, Spain, South Korea or Taiwan. All these countries are important for the Illex fishery. The Argentine and British governments should recognise their political commitments under UNCLOS and the High-Seas Fishing Agreement to reach a multilateral agreement. The bilateral South Atlantic Fisheries Commission is not in accord with the general development of international law.

[End of p. 7]

There are substantial pressures on the Illex fishery, from high-seas fishing, early in the season, when the Illex are young. With a bad co-incidence of environmental factors and increased fishing effort, both Argentina and Britain face the possibility of the Illex being overfished before they reach the waters covered by the SAFC. At best this would result in the loss of revenue for one year. At worst the stock might be insufficient to breed and the fishery could collapse for several years or perhaps permanently. This problem can only be addressed by the fishing countries agreeing to restrict their activities early in the season.

The legal, environmental, economic and political factors all point to the superior nature of a multilateral arrangement. The priorities are

1. for Argentina and Britain to ratify the High-Seas Fishing Agreement;
2. for Argentina and Britain to encourage other governments to ratify the Agreement; and
3. for all the governments involved to negotiate a conservation and management regime.

[End of p. 8]

The Falkland Islands Association Response Safeguarding Falkland Islands' Democracy *

The Falkland Islands Association is authorised to state that this paper has the support of the recently elected Legislative Council of the Falkland Islands.

The Falkland Islands Association's Response to the South Atlantic Council's paper of June, 1997, on The Falkland Islands: The Options for the Future.

SUMMARY

The Falkland Islands Association believes

that the Argentine claim to the Falkland Islands, South Georgia and the South Sandwich Islands is spurious;

that the Falkland Islanders have the right to self-determination, which means a government of their own choice;

that it is not to their advantage to 'adjust their current position', as the South Atlantic Council asserts;

that a permanent peaceful settlement has to be acceptable to the Falkland Islanders, and

that this requires

1. the Argentine government formally to renounce its claim; and
2. the British government to preserve the status quo until it does.

THE CURRENT POSITION

Fifteen years after the war, we consider that the moment is not propitious for negotiations to begin to explore ways of moving towards 'new political and legal arrangements to govern activities in the Islands and their surrounding waters'. The new British government has stated its determination to take full account of the wishes of the Falkland Islanders. The Falkland Islanders have consistently rejected any proposal that falls short of a genuine renunciation of the Argentine claim. The present Argentine government may be disposed to find what the South Atlantic Council considers to be a 'reasonable solution' but, as the talks at Chevening earlier this year proved, Dr Di Tella could not even carry his own officials with him, let alone the Argentine Congress. President Menem proposed a 'reasonable solution' of the Hielos Continentales dispute with Chile last year, but was successfully opposed by Argentine nationalists. His government has been weakened by unemployment, corruption and a number of serious scandals such as the Cabezas murder and subsequent resignation of his Justice Minister and recently lost its parliamentary majority in the mid-term elections. We believe that no

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* The SAC is grateful to Sir Rex Hunt, Chairman of the FIA, for giving permission for their paper to be reproduced.

[End of p. 9]

'reasonable solution' of the Falklands dispute proposed by the present Argentine government would find acceptance by the Argentine Congress or overcome the problem caused by the recent inclusion of the claim in its new Constitution. In any event, neither the British nor the Falkland Island government would seriously contemplate 'new political and legal arrangements' with oil drilling in north Falklands waters imminent. The period from now to mid-1998 is, therefore, not a window of opportunity.

The maintenance of a garrison on the Islands is now the only Falklands cost borne by the British taxpayer. Even that cost will be taken over in full as pledged by the Falkland Islands Government in its letter to the British Foreign Secretary in December 1994 declaring 'It is the intention....to meet the entire cost of the Islanders' defence as and when they are able to do so from oil or other revenues'. The Islanders already contribute about £3.6 million a year towards the cost of the British forces, a far higher proportionate contribution per person than UK residents pay for the UK's defence. Considerable benefits accrue to the British armed forces, not least invaluable training areas and facilities acknowledged by the Ministry of Defence to be unequalled elsewhere in the world, especially as other training areas cease to be available. All three services benefit, the RAF in low-flying and air-to-air refuelling experience; the Royal Navy using a friendly port of call for its Antarctic Patrol Ship Endurance; and the Army in infantry training and control of minefields.

If there is no oil, a recent MORI poll showed that most of the British public questioned considered that Britain should continue with the current level of spending, i.e. 0.29 per cent of the UK defence budget. The Argentine government may have forsworn the use of force to gain (not regain) the Islands, but no Islander would consider that sufficient guarantee to withdraw the garrison.

The Argentines may feel the need for some form of acknowledgement of their claim, but that does not make it any the more legitimate. The important fact is that, since 1833, Britain has exercised effective, continuous and peaceful possession, occupation and administration of the Islands, except for two-and-a-half months of unlawful occupation by the Argentine military in 1982. The Argentines may also feel aggrieved about the obstacles to them visiting the Islands, but that does not compare with the grief felt by the Islanders at being invaded and occupied in 1982 and having to suffer a continuing Argentine claim since. Despite this, and despite the Argentine rejection of Britain's offer to repatriate their war dead in 1982, the Islanders have never raised any obstacle to properly organised visits by bona fide next-of-kin. Several such visits have taken place.

Far from the sovereignty dispute being a possible impediment to British trade with, and investment in, Argentina, both are now booming. Indeed, the existence of the dispute encourages the Argentine government to attract British businessmen because it openly believes that trade will serve as a lever to assist a settlement in its favour. The South Atlantic Council's paper tends to support this view.

[End of p. 10]

Falkland Islanders have neither the need nor the desire to trade with Argentina. They certainly do not want closer political relations. While most would applaud the return of democracy to Argentina, the past does not instil confidence in the future and the present causes concern. Corruption in Argentina is widespread, particularly in politics and the police; there is considerable violence; there is regular harassment of journalists and the public lack the confidence in the forces of law and order, especially the judiciary, which was reported recently as having dropped in reputation to its lowest level ever. Islanders consider themselves better off maintaining their current connections with Punta Arenas in Chile. The Chileans there are sympathetic to the Falklands, goods are cheaper and there is less corruption. The nearest Argentine towns are small and offer fewer services than Punta Arenas. Since 1982, air links with South America have also been developed through Punta Arenas.

FISHING

The Falkland Islands has an outstandingly good record in fish conservation and management, 'probably the best managed fishery in the world', to quote the Economist (December 1996). By contrast, Argentina has a bad record, as the Argentine Greenpeace Report (June 1997) emphasised, and the Argentine authorities admitted. Experience suggests that the future of the fishing industry and of the environment is safer in Falklands' hands than in Argentina's.

We accept that current bilateral arrangements on fishing are not sufficient to guarantee the future of the industry, but technical talks continue under the sovereignty umbrella and practical co-operation exists at working level. It is the Argentine government that has so far refused to sign a long-term fisheries agreement. As for the Illex fishery, we agree that multilateral arrangements are necessary under the High-Seas Fishing Agreement, but we cannot see how an agreed solution of the sovereignty dispute would have any effect on the other governments involved.

OIL

We do not accept that current bilateral arrangements on oil are insufficient to guarantee the future of that industry. On the contrary, the Falkland Islands government has all the necessary legislation in place to protect the environment, ensure proper Health and Safety practices and to regulate the industry. Talks continue on arrangements in the area of special co-operation, and the oil companies with tranches in the northern waters have shown confidence in the future by planning to sink exploratory wells next year. If oil is discovered, it will be financially possible to build the necessary infrastructure on the Falkland Islands, though it is highly likely that any oil produced would be offshore loaded and onshore facilities limited to basic support services. The future of an oil industry depends not upon an agreed solution of the sovereignty dispute but upon

[End of p. 11]

the striking of oil. If it is not found, there is no industry. If it is, it will provide the best possible security for the Falkland Islands.

ANTARCTICA

The Falkland Islands provide the United Kingdom with a unique gateway and base for the Antarctic, and a valuable port of call for the unrivalled work of the British Antarctic Survey and its vessels. As the Falkland Islands Government says in its Policy Document, The Future for the Falkland Islands, 'Antarctica may eventually prove to be the last unspoiled place on earth of any size and as such will assume immense significance to mankind. Our national concern over conservation leads us to believe that we are in a key position to influence not only the debate involving the future of Antarctica but also the management of that future.'

THE OPTIONS

We agree that none of the proposed solutions contained in the South Atlantic Council's paper has the support of all three governments and peoples. However, we take the opposite view to the South Atlantic Council on the need to explore the various options. We believe that this would create false expectations on the part of the Argentines, leading to misunderstanding, disappointment and recrimination. It would not lead to understanding and appreciation of the needs and wishes of the Falkland Islanders. Nor do we believe that exploration of the various options would 'identify the possibilities for mutual accommodation and gain the benefits of full co-operation' - whatever that may mean.

We have the following comments on the various options proposed by the South Atlantic Council:

A Permanent Umbrella: this amounts to a freeze of the respective sovereignty claims of Britain and Argentina, following the example of the claimant states in the Antarctic Treaty. It was proposed in 1981 by Britain, accepted by the Falkland Islands and rejected by Argentina, who saw it as no more than a continuation of the status quo. Now, however, the South Atlantic Council proposes a bilateral treaty (presumably between Britain and Argentina) providing new permanent institutions (presumably with British and Argentine representation) 'to promote co-operation'. This is Shared Sovereignty in all but name and as such would be unacceptable to the Islanders and acceptable to the Argentines only as a short-term stepping stone to full sovereignty.

Independence: this is a long-term possibility acceptable to Britain and the Falkland Islands, but only if Argentina were to drop its claim and recognise the Falkland Islands as an independent state.

Integration with Argentina or with Britain: integration with Argentina is totally unacceptable to the Islanders for the foreseeable future. Integration with Britain is probably equally unacceptable to the Argentines.

[End of p. 12]

Shared Sovereignty: this has been unacceptable to the Falkland Islanders and the Argentines in the past. Reports now indicate that perhaps 50 per cent of Argentina may be prepared to accept shared sovereignty, but only as a short-term stepping stone to full sovereignty.

Greater Antarctica: this must be seen by most of the Antarctic Treaty nations as a foolish suggestion and totally irrelevant to the terms and conditions of the Antarctic Treaty. (It is perhaps not realised by the South Atlantic Council that Stanley is no nearer the South Pole than London is to the North Pole.)

Autonomy: the Islanders already enjoy a large amount of autonomy, with Britain responsible for foreign affairs and defence. They are not and probably would not wish to be an integral part of Britain.

Self-Government as a Dependency: this is very much the position of the Falkland Islands today. They do not play a distinct role in international affairs, but nor do other British Dependencies, including the Isle of Man, Jersey and Guernsey.

Self-Government in a Free Association: this is almost the same as independence, with a treaty obligation by Britain to conduct foreign affairs and defence on the Falkland Islands' behalf. This would be acceptable to the Falkland Islands and Britain, but not to the Argentines. If Argentina were the other country, this would not be acceptable to the Islanders.

Lease-back: this was never endorsed by the British and Argentine governments in the past. Lease-back to the Argentines meant a short-term arrangement during which the modalities of the transfer of sovereignty from Britain to Argentina would be sorted out. To the British, it meant a much longer term, decades at least. No proposal was ever put to the Argentines by the British because the Islanders rejected it out of hand, arguing that they had the lawful freehold and should not be made to reduce their title to a leasehold.

CONCLUSIONS

All the options in one form or another have been debated endlessly over the past thirty years and none has been found acceptable to all three parties. There may be different interpretations of the word 'sovereignty', but Falkland Islanders have a clear understanding that British sovereignty means freedom under a British flag whereas Argentine sovereignty means alien rule under an alien flag.

The South Atlantic Council concludes that some form of permanent co-operative arrangements between Britain and Argentina, combined with assured self-government for the Islanders, is most likely to succeed. But the Islanders already have internal self-government, assured by Britain. The British government

[End of p. 13]

has undertaken not to impose a solution upon the Islanders against their wishes. For any solution to succeed, therefore, the Islanders must be recognised as equal parties in any negotiations affecting their future.

Finally, we question the South Atlantic Council's assertion that it has worked to promote greater communication and understanding among all the parties. Its paper shows little understanding of the Falkland Islanders' position. Its suggestion that the Falkland Islands could be incorporated in the Antarctic Treaty System reveals a deplorable ignorance of the subject. If fully incorporated in the Antarctic Treaty System, which bans mineral exploration (under the 1991 Environmental Protocol), the Falkland Islands would be inhibited from developing an oil industry. Its claim to bring together interested individuals with experience of all aspects of the issue cannot go unchallenged. On the Falkland Islands, its member offers very little–––except ideas and perspectives from Argentina.

Sir Rex Hunt

Chairman, Falkland Islands Association, 12 November 1997

[End of p. 14]

 
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