Argentine bill threatens Falklands oil deal

BRITAIN FEARS that a draft bill in Argentina's Congress could harm a delicate deal on oil exploration off the Falklands, designed to let both sides benefit without compromising sovereignty claims.

William Marsden, who before becoming British ambassador to Argentina was London's chief negotiator in the oil talks, has expressed concern that the bill was contrary to the 1995 bilateral deal on South Atlantic oil.

The 1995 deal was an "agreement to disagree" on Falklands sovereignty, which Argentina has claimed since 1833. The oil deal, signed by President Carlos Menem's Peronist government in 1995, despite opposition including from many in his own party, provided a framework for exploration in one of the world's last unexplored sedimentary basins.

It allowed for the Falklands to claim 9 per cent oil royalties on any oil eventually pumped and Argentina 3 per cent, without either side's sovereignty claim to be compromised.

But the start of drilling in April by an American company, Amerada Hess, sparked protest from Argentina that the company was abiding by the Falklands' rules and not by Argentina's.

Mr Marsden defended the oil deal, saying it was "already bringing benefits to both countries." But he said Britain was concerned that if the congress passes the hydrocarbons bill, it would act against the 1995 deal.

"Our overriding concern is that the arrangements that are put into effect are compatible with the agreement," he said.