2013: Chairman's Report



The Chairman’s report permits me to review developments that have affected the Falkland Islands over the past year – and I am pleased to report that the Falklands are thriving, economically, politically and internationally. 

Economically, the injection of funds into the Falklands economy deriving from the second round of oil exploration since 2010 has relaxed the budgetary constraints that were beginning to be felt following the global economic downturn which began in 2008. The discovery of commercial quantities of oil in the Sea Lion field, the involvement of major oil firms such as Premier Oil and the prospect of commercial extraction by 2018 has instilled a much greater level of confidence in the future of the hydrocarbons sector in the Falklands. It has shown that oil companies can work with remote supply without impact from Argentine restrictions. The further drilling round this austral summer will be the test of future investor confidence. If all goes well, the economic future of the Falklands will be secured for many years into the future. It is an exciting prospect. 

Oil will undoubtedly change the Falklands but the Falkland Islands Government (FIG) is planning sensibly for it. It has engaged independent technical expertise and can rely on the support of relevant Whitehall Government Departments and the British Geological Survey. FIG is actively pursuing an infrastructure development plan and has undertaken a longer-term socio-economic development review and has sent teams to learn from successful oil producing countries, like Norway. Nor is FIG being profligate with its increased revenue; rather it is sensibly building up its reserves and continuing to invest in the other mainstays of the economy – the fisheries (and it was another good year for fisheries revenue), tourism and agriculture. 

It is occasionally still necessary to correct a misconception in the UK that the Falklands are a drain on the UK Government’s purse. The Falklands are self-reliant in all matters save defence. The UK provides no development, technical co-operation or capital aid. FIG does not borrow, has no debt, does not carry budget deficits, and has sizeable reserves and a fully capitalised pension system. The UK’s defence costs in the Falklands are well under 1% of the total UK defence budget, however they are calculated, and the British military derive various practical benefits from their presence in the Islands. FIG contributes towards the cost the Islands’ defence, albeit not directly, but it maintains its own well equipped, well trained defence force – the FIDF – which would come under British military command in an emergency and it contributes financially to the construction and maintenance of military housing and leisure facilities – and has long undertaken to contribute more directly within their means when oil revenues begin to flow. 

The Falklands thrive politically. Islanders exercised their democratic rights in the referendum in March to indicate their wish to remain a UK Overseas Territory by 99.8% of the vote. They 

enjoy full self-government on domestic (and, increasingly, international) affairs, enshrined in the new Constitution which came into effect in 2010, notwithstanding Argentine attempts to portray the community as overborne by the colonial yoke. For the first time, the new Legislative Assembly, elected on 7 November, are in full-time salaried positions rather than working as part-time volunteers receiving allowances. This has allowed one younger member to join the Assembly (and to bring his economic expertise to their deliberations). Democracy, like the business climate, in the Falklands remains vibrant. 

Above all, the Islanders receive huge cross-party support in Westminster for their right to self-determination. The Prime Minister continues to make this clear and it was noticeable that the Foreign Secretary, William Hague, went out of his way to meet the Falklands delegates at the reception for UK Overseas Territory leaders in the Foreign & Commonwealth Office on 27 November. The UK Overseas Territories Joint Ministerial Council communiqué made a point of supporting the right to self-determination, enshrined in the UN Charter and welcomed British parliamentary interest in, and support for, the Overseas Territories. I welcome the presence here of Andrew Rosindell MP, who is secretary to the All Party Group on the Overseas Territories, which takes a keen interest in the Falklands. 

Internationally, the Islanders have taken the initiative in mounting a sustained public diplomacy campaign both before and after the referendum to counter Argentina’s sovereignty claim. This has involved visits to capitals in the Americas, the Caribbean and Europe – and political and media representatives have been invited to the Falklands, not least from the US, Latin American countries and, most recently, Brazil. Whilst this may not change views overnight, it begins to undermine longstanding misconceptions. Indeed, the level of ignorance about the real situation in the Falklands can be shocking: one recent Latin American visitor, fed by Argentine propaganda, expected to meet a Spanish-speaking population subject to a British colonial class (shades of 1982). 

Argentina continues, of course, tenaciously to peddle its policy both domestically and in international and regional organisations but I am not sure that it can count any particular development as a success – not even engineering mentions of the Falklands in the UN Security Council open debate in August: this merely allowed the UK Representative to present the UK’s position and to stress that any discussion of sovereignty is not just a matter for two Governments, as Argentina likes to maintain, but also with the Government of the Falkland Islands (which Argentina seeks to ignore). 

Economically, Argentina remains in difficulties with mounting debt, high unemployment and rising inflation. Politically, President Kirchner’s version of Peronism took a significant knock in the recent Argentine mid-term elections in October down to a majority of 1 in the Lower House and 3 in the Senate with Opposition candidates doing well in key districts. There is now no realistic prospect of her achieving the necessary majority to change the constitution to allow her a third term. Whether her chosen candidate within the Peronist tradition will 

succeed her in 2015 remains to be seen but for an Opposition candidate to win the Presidency the various Opposition parties will have to come together in a united front. 

President Kirchner’s leadership has also been temporarily weakened by her illness. Her return to office in November led to a reshuffle, in part a response to the weak electoral results. There is little prospect, however, of any re-think on Argentine policy on the Falklands. The passage this month of an amendment to the Argentine 2011 hydrocarbons law now makes it a criminal offence to engage directly or indirectly through a third party in hydrocarbons activities in the Falklands rather than requiring an Argentine licence to do so. It is unclear how they expect that this will affect the exploration being done in the Falklands, since none of it touches Argentina in any case. 

As for the Falkland Islands Association, it has been a year of mixed feelings as we have said goodbye to some stalwart supporters of the Islands – Sir Rex Hunt, Lady Thatcher and more recently Admiral Sir Sandy Woodward. The Association mounted a special celebration of Sir Rex Hunt’s life in the RAF’s church of St Clement Danes in June, which was well attended and appreciated by his family. But we have had perhaps less to do to promote UK support for the Islanders, since this is currently so widespread, politically and in the media, particularly in response to the more confrontational nature of Argentina’s public posture. But there are presentational issues, both current and in the offing, that we must watch carefully to prevent the situation changing for the worse. 

The Association has commemorated Battle Day at the Cenotaph for many years now. Next year – the centenary of the Battle of the Falklands (and Coronel) in 1914 – will be different. We plan to hold a much larger event on the anniversary, Monday 8 December, in the Navy church of St Martin’s in the Fields to which members of the relevant ship associations and representatives of the German Government and Navy will be invited. Wreaths will be laid in the church (and then brought privately to the Cenotaph later in the day) – and there will be a ticketed reception afterwards in the Charing Cross hotel. So please keep the date in your diary. We shall circulate details on the website and in the Newsletter as they firm up.