Falklands oil search mends old enmities

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Diplomatic Editor

Britain and Argentina are edging quietly towards settlement of a dispute over oil exploration around the Falkland Islands and the two countries are rebuilding connections between their armed forces.

British officials said yesterday the UK arms embargo on Argentina would stay in place for the foreseeable future. But there are indications that the Government may be seeking a way to allow Rolls-Royce to supply some spare parts for engines powering six frigates and destroyers of the Argentine navy.

Although there is no formal link between the two issues, a resolution of the oil dispute could smooth the way for a more relaxed attitude towards military deals.

An outline agreement was reached at talks on oil exploration in New York last weekend but its details are being kept confidential because it still needs ministerial approval in both Britain and Argentina. The agreement is understood to provide for a co-operative joint approach towards offshore exploration in waters around the Falklands that are still subject to territorial dispute.

The issue is of paramount interest to the Falkland Islanders, for whom the exploitation of natural resources could prove an economic bonanza. A set of new licences for exploration will be issued in the next few days.

In a symbolic gesture of the improving relations between London and Buenos Aires, an Argentine navy sailing ship, the Libertad, has been moored in the London docks this week. The visit comes after a tour of Argentina by a British Army training team for UN peacekeeping missions.

An Argentine delegation, including the brother of President Carlos Menem, met the Foreign Secretary, Malcolm Rifkind, this week as a prelude to the annual Britain-Argentina conference, an unofficial gathering in London of businessmen and academics, which opens today. The conference was set up to maintain dialogue between the two countries before diplomatic relations were re-established in 1990.

President Menem has made the improvement of links with Britain a policy priority, in part because Argentina is also seeking trade agreements with the European Union, which London could veto.