In October, Argentina brought a complaint to the International Tribunal for the Law of the Sea (ITLOS), seeking to block oil exploration authorised ‘illegally’ by the UK north of the Falkland Islands. The move by President Javier Milei’s administration represents the latest escalation in a dispute between Argentina and the UK that has revived long-standing tensions over the sovereignty of the British overseas territory.

The claim relates to an oil project in the North Falkland Basin. The area, which is located around 130 miles from the Islands, contains an estimated 1.7 billion barrels of oil. Argentina’s filing seeks to preserve its ‘sovereign rights over its continental shelf and prevent activities authorised unilaterally and illegally by the United Kingdom.’ Argentina maintains that the Islands – which it calls ‘Las Malvinas’ – are its rightful territory.

President Milei’s remarks followed a suggestion by his ally, US President Donald Trump – who, in 2025, also used a speech at the General Assembly to criticise the UN – that his government would review its long-standing policy of neutrality on the Falklands issue.

In 1982, the UK and Argentina fought a 74-day war for possession of the Islands. Francisco Macías, an oil and gas partner at Marval O’Farrell in Buenos Aires, says the debate over the territory continues to be a highly ‘sensitive’ issue in Argentina more than 40 years later, with the country’s lawmakers still struggling to agree on how to engage with the islands. In 2024, President Milei said he would establish a ‘roadmap’ for them to become part of Argentina, despite 99.8 per cent of those living on the islands voting in favour of remaining a British overseas territory in a 2013 referendum. The UK government has said it ‘fully supports the wishes of the islanders to remain a British overseas territory.’

In the face of falling approval ratings and with an election looming in 2027, President Milei has decided to flex his muscles on the issue once again, says Macías. The Milei administration had not, until a few months ago, actively enforced Argentina’s regulations that prohibit companies from operating in the waters around the Falkland Islands, he says. The President’s strategy ‘has been to rely on US support to force the UK to negotiate sovereignty. However, Argentina’s political opposition managed to force Milei to take a more aggressive approach regarding this matter and he has overreacted’ because of next year’s elections.

Matt Barlow, a lecturer in international political economy at the University of Glasgow, agrees that the timing of the issue coming back onto the agenda is not coincidental. ‘Recent disapproval ratings have put President Milei at 58 per cent and economically, people are struggling to make ends meet. Reigniting the Falklands debate is a way to reinvigorate his nationalist base, even though he is the least likely champion of sovereignty of the islands,’ he says.

In September, President Milei introduced a new national sovereignty defence bill to Congress, which proposes to expand the sanctions and penalties for unauthorised hydrocarbon activity in the waters around the Falkland Islands. The bill effectively repeals a 2011 law penalising hydrocarbon exploration and seeks to replace it with a wider framework of sanctions and fines that will affect financial organisations and suppliers of companies in this sector. The proposed legislation also targets ‘unauthorised’ fishing-related activities around the Falkland Islands – another critical sector for the territory’s economy.

Barlow says the bill has already come up against significant hurdles. ‘It has stalled because some of the bill gives the president significant powers and parliamentarians are concerned about this,’ he says. However, in Barlow’s view the bill is ‘more politically motivated around the sovereignty’ of the Falkland Islands ‘and less about Milei’s broader approach to natural resources.’ Macías agrees that these developments don’t indicate a departure from President Milei’s generally pro-business approach and says they shouldn’t be viewed as ‘a shift to resource nationalism or as imposing restrictions on foreign investments.’

The International Monetary Fund recently downgraded its 2026 growth forecast for Argentina to 2.1 per cent but expects ‘an acceleration of growth’ into 2027, partly as a result of President Milei’s fiscal and other economic reforms.

Economists say the long-awaited EU-Mercosur free trade deal, which was signed earlier in 2026, could also boost Argentina’s trade volume with the European bloc. The deal can be viewed as a particular success for Argentina, says Renê Medrado, a Member of the IBA International Trade and Customs Law Committee Advisory Board and a partner at Pinheiro Neto Advogados in São Paulo, as it was agreed despite ‘profound political differences between’ Milei and the leader of the other largest player within the Mercosur bloc – Brazilian President Luiz Inácio Lula da Silva.

Meanwhile, as fossil fuel exploration in the seas off the Falkland Islands continues to be contested, there’s growing discontent within Argentina that the country is failing to benefit from the oil boom happening elsewhere.

Macías points to the Vaca Muerta project, located in the Neuquén Basin. Since fracking was legalised in Argentina in 2014, the project has become home to one of the largest oil and gas fields in the world and has made energy exports a key source of foreign currency for the country.

However, as the sector remains stymied by broader infrastructure constraints, these economic gains are not yet large enough to ‘offset’ the country’s broader macroeconomic challenges, says Macías. ‘The scale of the oil sector is not yet sufficient to transform the overall economy on its own,’ he says. ‘The larger economic payoff is likely to emerge over the coming years if production growth is matched by infrastructure development and sustained macroeconomic stability.’

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