British ministers were keen to exploit oil around the Falkland Islands before and after the 1982 conflict, declassified British government documents show.
In a previously unpublished letter, the former chancellor Norman Lamont said the revenues from Falklands oil should go to the British government, not the Falkland islanders.
“I have no doubt that in the event of a major oil find, tax revenues should accrue to the UK exchequer. That seems to me only equitable given the very substantial financial as well as other sacrifices that the UK has made … to secure the freedom of the Falkland Islands,” Lamont wrote to the then foreign secretary, Douglas Hurd, on 21 October 1991.
Lamont added: “We would not want to give credence to the accusation that our Falkland Islands operation was motivated by a belief that there was oil to be found in Falklands waters, which would be quite untrue.”
Nevertheless, he and other cabinet ministers, including the prime minister, John Major, and Hurd, agreed that Britain should get the bulk of any oil revenues, approving a 1991 overseas and defence policy cabinet committee paper that stated: “If oil were to be found in commercially recoverable quantities, HMG [Her Majesty’s Government] … should take such measures as are necessary to ensure that HMG can secure access to a substantial share of the concomitant revenues.”
The paper asked: “Should the Falkland islanders be the exclusive beneficiaries of what might be comparatively enormous wealth?” It concluded: “We should only seek access to oil-related revenues when it is clear that the financial benefits will outweigh the political difficulties.”
Ministers agreed to authorise the islanders to carry out seismic surveys to establish the size of the oil deposits and then decide how to share the revenues. On 22 November 1991, Britain proclaimed its right to up to 200 nautical miles of the seabed and subsoil around the islands. The Falkland Islands government began to auction oil exploration licences in 1996, but all the revenues since then have accrued to the Falklands government, not Britain.
Official papers for the years after 1991 have not yet been declassified, but the outcome suggests that the British government concluded that the value of the oil revenues did not outweigh the political embarrassment of claiming them.
Declassified documents show that Britain has long been interested in oil around the Falkland Islands. In 1975, an energy department official wrote: “Our ministers are very interested in the possibility of exploiting offshore oil around the Falkland Islands.”
Before the Falklands war, Britain vigorously defended its claim to potential oil reserves around the islands. Britain formally protested when Argentina commissioned seismic surveys off the Argentine coast in early 1977. An energy department official wrote that the “worst thing would be to do nothing” as this could lead to “our giving up without so much as a whisper the title to any oil which might lie beneath the sea outside the 200-metres line”.
Britain protested again in 1981 when Argentina auctioned more exploration licences. A Foreign Office official wrote: “We must maintain that any oil in the Falkland Islands continental shelf is British, without specifying whether we mean HMG or Falkland Islands have the right to exploit it. The important point is that it is ours not Argentine.”
In July 1980, Margaret Thatcher’s government held secret talks with Argentina and proposed a “leaseback” deal, whereby the sovereignty of the islands would be transferred to Argentina but then leased back to Britain.
While ministers were considering the idea, the energy secretary, David Howell, wrote to the foreign secretary, Lord Carrington, on 5 February 1980, saying: “I hope … you will not lose sight of retaining, if at all possible, access for the UK to any oil or gas which might be found in Falkland Island waters.”
He repeated this plea in a letter to Thatcher later that month. The cabinet’s defence and oversea policy committee, which included Thatcher, agreed on 7 November 1980 to seek the islanders’ approval of a leaseback deal.
Ministers noted: “It would be important to make satisfactory arrangements for any oil that might be discovered … Further thought should be given to ways in which the United Kingdom might be guaranteed entitlement to a substantial part of the revenues.”
