• Lee Jenkins

    Many of Argentina’s economics woes are shared by its neighbours, but
    many are self inflicted. Pension pots have been raided and banks wrung
    for extra cash for spending sprees. When that ran out, the Spanish YBF
    oil company became fair game for nationalisation. Kirchner accuses YBF
    of under investing in Argentinean oil fields. But clumsy price controls
    imposed by the government kept prices artificially low. This kept voters
    happy, but starved the company of the funds needed for exploration and
    investment.

    If the YBF action was meant to boost the economy and government
    coffers, it was short-sighted in the extreme. The affair may have
    boosted Kirchner’s nationalist credentials, but has had two regrettable
    and completely foreseeable side effects. Firstly, it will have scared
    off any potential big investors in Argentina. Why pour millions into
    starting an enterprise if a fickle government can snap it up once it’s
    successful? Secondly, by enraging Spain, Argentina has lost its closest
    thing it had to a friend in Europe. In solidarity with Spain, the EU has
    imposed tariffs and restrictions on Argentinean goods.

    So what does this mean for Britain and the islanders?

    The financial strains on Argentina are unlikely to improve anytime
    soon. Although this may lead to an ever more desperate Kirchner, the
    president has very few cards to play. Militarily, the Falklands Islands
    are better defended than they have ever been. Four Typhoons, an infantry
    company and a Rapier SAM battery are a far cry from handful of Royal
    Marines who stood guard in 1982. By comparison, Argentina’s military is
    smaller than thirty years ago, but use much of the same equipment. The
    timely deployment of HMS Daring further emphasises the gulf in the
    military technologies of Britain and Argentina.

    Legally, the situation is not much better for the would-be liberator
    of the Malvinas. Britain claimed the islands before Argentina was even a
    country. In addition, the UN Charter on Self Determination clearly and
    resounding back Britain’s position.

    Argentina’s best hope is her regional allies. In an effort to make
    the British ownership untenable, Kirchner is trying for death by slow
    economic strangulation. Ships bearing the Falklands flag are being
    denied access to ports. No doubt other actions will follow. But this is a
    dangerous game to play. Tit-for-tat restrictions on trade hurt
    everybody. They also depend on the fickle favour of fellow leaders.
    Lofty talk of Bolivarian solidarity make for great joint press releases,
    but regional leaders answer to their own voters, not Argentinean ones.

    Argentina had a weak hand and played it poorly. Britain’s response
    has been the correct one. Our calm and (mostly) measured statements are a
    mature juxtaposition to the hot headed screeching emanating from Buenos
    Aires. We have resisted the obvious trap and declined the invitation to
    match Argentina’s tone. Belligerent speeches and jingoism from London
    would have been counterproductive. They would have backed Kirchner into a
    corner, forcing her to pick between lashing out and a humiliating climb
    down. Moreover, they would have put Britain on a par with Argentina. We
    are not. We have the legal, moral and military high ground.

    President Kirchner is doing a very good job of tarnishing her and her
    country’s credibility all by herself. The economy and her domestic
    rivals will be her downfall, not British arms.

    Reassuringly boring and staid though our actions are, they will prevail.

    Never underestimate the latent power of diplomatic inactivity…