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Originally published Thursday, March 15, 2012 at 1:43 PM

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Argentina takes aim at Falklands oil companies

Argentina is intensifying its campaign to block oil development in the Falkland Islands, announcing on Thursday it will pursue "administrative, civil and criminal" penalties against the dozens of companies involved.

Associated Press

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BUENOS AIRES, Argentina —

Argentina is intensifying its campaign to block oil development in the Falkland Islands, announcing on Thursday it will pursue "administrative, civil and criminal" penalties against the dozens of companies involved.

"We are going to defend the resources of the South Atlantic, which are the property of all the Argentines," Foreign Minister Hector Timerman said at a news conference. He said that includes any oil found off the shores of the islands they call the Malvinas, which have been controlled by Britain since 1833.

Once the colonial subjects of Britain, the roughly 3,000 islanders now determine their own fate. Already, they have collected millions of dollars in licensing fees for oil exploration, and they've had their first major offshore oil discovery - last year's Sea Lion strike that promises to deliver as much as 450 million barrels of oil.

It was found by Rockhopper Exploration PLC, which has been seeking a $2 billion investor to fund production starting in 2016. The company has yet to announce such a deep-pocketed partner, but if and when it finds one, industry analysts estimate that a total of $10.5 billion in taxes and royalties would start flowing into the Falkland Islands treasury from the Sea Lion find alone.

Argentina, which lost a brief and bloody war against Britain for the islands in 1982, aims to keep that production from starting by any means possible short of violence or war, Timerman said, adding that his government will always follow international law.

Many financial documents dealing with oil in the islands already note the risks of drilling in territory also claimed by Argentina, but Timerman said Argentina will go to industry regulators in New York and London to make sure such warnings appear in the filings they require. He also threatened to take legal action against companies involved in the islands' oil industry wherever possible.

"We won't let one day pass in the courts without defending our resources," Timerman said.

This April 2 marks the 30th anniversary of the Argentine dictatorship's invasion and occupation of the islands, which lasted for 74 days before British troops ousted them in a brief and bloody war. It was a humiliating defeat for the military junta that hastened the return of democracy to the country.

But Argentines still consider the islands their lost province, despite nearly 180 years of British control, and President Cristina Kirchner has pushed Britain for negotiations over their sovereignty in every possible international forum.

Latin American allies have largely backed her campaign, creating fears in the oil industry that any company supporting oil exploration in Falklands-controlled waters could be shut out from the mainland.

It was this Argentine threat - and not poor prospects - that prompted Australia-based BHP Billington to abandon a multimillion-dollar exploration effort in the Falklands several years ago, according to two sources with direct knowledge of the decision who spoke on condition of anonymity because the move remains so politically sensitive.

"We've learned there are two types of companies - those who do business in Argentina and those that don't. But there are a helluva lot of companies around the world with no interest in Argentina or their politics," said Stephen Luxton, the director of mineral resources for the Falkland Islands government.

Despite Argentina's efforts to starve the islands' economy by closing its ports and airspace to ships and planes that would otherwise supply them, many Falkland Islanders are beginning to think that Argentina can do little more to hurt them. The oil exploration already under way has proven to be resilient to the shipping embargo, for example.

"The Falklands haven't lost out. All we do is order the stuff from somewhere else," Luxton said. "There are a helluva lot of companies around the world with no interest in Argentina or their politics."

Now citizens of a direct democracy passes its own laws, sets its own taxes and will collect any oil royalties for its own treasury, islanders say they overwhelmingly want to maintain their ties to Britain and their status as a self-governing British Occupied Territory.

And Britain, in turn, says there's nothing to negotiate, since the islanders themselves will determine their future.

"These latest attempts to damage the economic livelihoods of the Falkland Islands people regrettably reflect a pattern of behavior by the Argentine government," Britain's Foreign Office said Thursday. "From harassing Falklands shipping to threatening the islanders' air links with Chile, Argentina's efforts to intimidate the Falklands are illegal, unbecoming and wholly counterproductive."

British Prime Minister David Cameron said in New York Thursday that he had discussed the conflict with U.S. President Barack Obama the day before - and that the U.S. clearly supports the status quo.

"I wanted to stress how important it is for Britain to set out how clearly we support the right of the Falkland Islanders to determine their own future. They want to remain with us and that is very clear," Cameron said as he wrapped up a U.S. visit.

"To me it is very important that we stick up for the right of self-determination, Cameron added. As the anniversary of the 1982 war approaches, he said he wants to send "a very clear signal to the rest of the world - Argentina and others - that while the Falkland Islanders want that status, Britain will help them keep that status."

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Associated Press Writers David Stringer contributed from London and Michael Warren from the Falkland Islands.

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