Argentina's Milei plans bill to toughen sanctions against firms operating in Falklands

BUENOS AIRES, Sept 14 - Argentine President Javier Milei is preparing legislation this week to toughen sanctions against companies operating in the Falkland Islands, a move analysts say raises uncertainty over whether he may escalate tensions with Britain by targeting other sectors of the disputed islands' economy.

The proposed bill will build on sanctions proceedings that Argentina's government says it has opened against at least 60 companies and individuals linked to offshore oil exploration around the islands, which Argentina calls the Malvinas and claims as its own even though Britain controls them. Argentina invaded the islands in 1982 and fought a 10-week war over them before surrendering to Britain.

Congress is set to receive Milei's 2027 budget proposal by Tuesday. It is expected to boost defense spending to address a sharper focus on sovereignty issues.

This month, U.S. President Donald Trump suggested Washington could reconsider its traditionally neutral position on the Falklands dispute. Since then, Argentina has accelerated efforts to target companies involved in oil drilling activities around the islands.

Milei's proposed legislation includes tougher penalties for unauthorized operations around the islands, congressional aide Marcelo Seghini told Reuters. He said it would extend sanctions to affiliates and cover other activities affecting Argentina's natural resources.

It follows a criminal complaint filed last week against companies linked to the Sea Lion offshore project in the Falklands.

Argentina's government has not responded to Reuters requests for comment or provided a list of companies facing sanctions proceedings, though names have been reported by local media.

Analysts said they were uncertain about the scope of Milei's proposed "national sovereignty defense" bill but called his sanctions an aggressive effort to translate Argentina's sovereignty claims into legal and commercial pressure.

"It was not a project developed over time or meticulously prepared," said Marcelo Elizondo, Argentina's representative to the International Chamber of Commerce. Trump's comments, he said, "created a climate that the government sought to exploit quickly."

Companies and investors are weighing whether sanctions could ultimately affect firms with operations in Argentina, including those involved in the country's vast Vaca Muerta shale oil formation.

The government has already faced pushback over the reported sanctions. Dutch geodata specialist Fugro published a statement saying it had been incorrectly identified by local media as collaborating with the Sea Lion project, adding that its activities in the area were limited to work on a sub-sea telecommunications cable.

Experts said the measures could complicate development of the Sea Lion project by creating a chilling effect around companies working with project owners Navitas Petroleum and Rockhopper Exploration.

Both companies have said the oilfield project holds valid licenses from the Falkland Islands government and have indicated they do not expect Milei's actions to derail development.

A government document reviewed by Reuters included a range of shareholders and financial intermediaries among companies marked for possible sanctions. They included Vanguard, First Eagle, Canaccord, Aberdeen-owned Interactive Investor and Hargreaves Lansdown.

Oil majors SLB, Baker Hughes and Halliburton have said in recent days they would not participate in activities on the islands.

“Without major service companies, one would have to turn to mid-sized firms with less established technical capabilities—companies that might be more expensive or slower to mobilize,” Juan Jose Carbajales, a former undersecretary of hydrocarbons in the former center-left government of President Alberto Fernández.

Seghini, the congressional aide, told Reuters the Milei government was considering expanding sanctions to the fishing industry in the expected legislation, potentially targeting a sector that underpins much of the Falkland Islands economy.

"The more you widen the supply chain, the more risk you run that these sanctions will be costly to you," said Federico Merke, a political scientist at the University of San Andres in Buenos Aires.

The sovereignty package will be a legislative test for Milei, whose libertarian coalition lacks majorities in Congress and has struggled to secure support for some economic reforms.

Center and left-wing opponents have long accused libertarian Milei of not doing enough to defend Argentina's claim on the Malvinas, and they now say he is acting for political reasons ahead of a likely 2027 reelection bid.

"He is clearly using the Malvinas for political opportunism," said Aldo Leiva, an opposition lawmaker. "If he wanted to defend the sovereignty of the Malvinas in these two years of government, he had the tools to do it."

Marcelo Garcia, a Buenos Aires analyst at the consultancy Horizon Engage, said Milei’s legislation makes investors uneasy because it may help the opposition force him to escalate measures against the United Kingdom.

“There was already concern about the elections next year, what if there’s a populist backlash in Argentina?” said Garcia.

Francisco Cafiero, a former secretary for international relations at the defense ministry, said the episode reflected a broader lack of strategic clarity.

"Here, we navigate amidst uncertainty and improvisation," he said. REUTERS