Oil, the Falklands, and Jerusalem: How an Israeli energy project sparked a diplomatic rift
Argentina freezes its embassy move amid tensions over a $1.8 billion oil development.
In recent days, the Argentine government has decided to freeze the planned relocation of its embassy to Jerusalem, a move that was expected to take place on the eve of Israel’s Independence Day. According to statements from Buenos Aires, the decision is linked to drilling activity planned by Navitas Petroleum, the energy company controlled by Israeli businessman Gideon Tadmor, in the Falkland Islands.
A month ago, Navitas announced its decision to move forward with its largest regional investment to date: the development of the Sea Lion oil reservoir. The field, considered the world’s fourth-largest undeveloped oil discovery, entails an investment of $1.8 billion and has an estimated production capacity of 32,000 barrels per day.
The complication is geographic and political. The Sea Lion reservoir lies in the Falkland Islands, a remote archipelago in the South Atlantic that has been at the center of a long and bitter sovereignty dispute between Britain and Argentina. The islands have been under British control since 1833 and are home to roughly 3,500 residents. Argentina has never recognized British sovereignty and refers to the territory as the Malvinas.
Tensions erupted into open conflict in April 1982, when Argentina’s military junta invaded the islands. Britain responded by dispatching its navy under Prime Minister Margaret Thatcher. After 74 days of fighting and hundreds of casualties, British forces regained control. Although the war ended, Argentina never relinquished its claim, and the dispute has continued to simmer for decades.
Late last year, the conflict resurfaced, this time with Israeli involvement. Following Navitas’s announcement that it would proceed with the project, Argentina reacted sharply, declaring that it “strongly condemns the illegal activity on the islands and reserves the right to take all necessary measures.”
Navitas responded in measured terms, stating that it holds valid licenses to develop the reservoir and that there has been no change in the legal status of the project. In December, the company made a final investment decision, formally committing to development.
Argentina’s anxiety is easy to understand. Beyond the historical and national sensitivities, the Sea Lion project is expected to be an economic windfall. The Falkland Islands’ local government is projected to generate around £4 billion in revenue from the project. Spread across the islands’ small population, the proceeds could effectively make every resident a millionaire.
For Argentine President Javier Milei, widely regarded as a close ally of Israel, the development is seen as a provocation. Argentine officials have described the situation as a “real crisis.” In Israel, however, officials suggest that Argentina was never fully committed to relocating its embassy to Jerusalem, citing concerns over a potential Arab boycott, and is now using the Navitas project as a convenient pretext.
Last month, Israeli Foreign Minister Gideon Sa’ar sought to defuse tensions, saying that while Israel understands Argentina’s sensitivities, its ability to intervene is limited. “Navitas is a publicly traded company, and there is no legal mechanism to prevent its activities,” he said.
The explanation failed to fully satisfy Buenos Aires. Still, Argentina’s ability to block development of the Sea Lion reservoir appears limited. The open question now is whether Israel and Argentina can find a way to bridge the dispute, or whether Israel will ultimately need to seek new partners in Latin America as it advances toward oil production in the Falkland Islands.
