British companies are set to begin drilling for oil reserves off the Falkland Islands this week, reopening a dispute with Argentina, which still lays claim to the archipelago.

It was nearly 30 years ago that Argentina occupied the Falkland Islands, attempting to reclaim by force the windswept archipelago that lies 300 miles off the coast of South America.

Argentine forces were handily defeated. But the South American nation has continued to lay claim over the islands, which they call the Malvinas, ever since.

Now the two nations are locked in a battle as British firms set out to begin exploring oil reserves this week in the South Atlantic. While no one expects a military showdown – some analysts dismiss the rhetoric as a political ploy by Argentine President Cristina Fernandez de Kirchner’s administration to detract attention from domestic woes – the potential of billions of barrels of oil has sparked one of the most tense disputes since the Falklands conflict of 1982.

“The Malvinas is an issue for many Argentines, it is part of the DNA of Argentines,” says Eduardo Diez, a foreign policy expert at the Argentine-American Dialogue think tank in Buenos Aires. “The Malvinas is still a nationalistic issue for many. … It’s also economical: there is really a lot of oil over there.”

Oil and sovereignty

The United Kingdom has maintained that British oil exploration firm Desire Petroleum, which is set to begin drilling imminently, has the right under international law to explore the waters around the disputed islands, while Argentina says the action violates the sovereignty of the Malvinas. Ms. Fernandez de Kirchner announced last week that any ships leaving its ports en route to the islands will first need permits.

Argentina has said it will take a complaint to the United Nations this week. It is also expected to be discussed at the annual Rio Group Summit of regional nations being held in Mexico this week.

The archipelago, made up of two main islands and hundreds of smaller ones cut by fjords and sounds, has been in British hands since 1833. Under military dictatorship, Argentina led an attempt to wrest control of the islands in 1982, occupying the nation for ten weeks. Nearly 900 were killed in the conflict.

While both nations restored diplomatic relations in the early 1990s, Argentina has continued to assert its right to the territory, home to about 3,000 residents. The British maintain about 1,000 troops on the island.

Dialogue, not force

Both nations have said that the conflict will be resolved through dialogue, not force.

“It is perfectly within our rights to be able to do this, I think the Argentineans actually understand that,” Prime Minister Gordon Brown said on local radio, according to Reuters. “Sensible discussions will prevail on this.”

Some have suggested that Fernandez de Kirchner is stirring up sentiment because of her waning popularity, over such issues as high inflation. They are looking like the [Argentinean] military did in 1982, looking for a nationalistic topic to woo the [Argentine] people, says Riordan Roett, an Argentina expert at Johns Hopkins University. This is saber-rattling.

Already, Venezuelan President Hugo Chaivez has weighed in. On Sunday, Chaivez said “Look, England, how long are you going to be in Las Malvinas? Queen of England, Iam talking to you…. The time for empires is over, havent you noticed? Return the Malvinas to the Argentine people.”

Mr. Diez says Argentines dont list the Falklands as a top priority, but that this spat could rally the country together. At this moment, when we have a problem with oil, any government, not just this one, will express [its] disappointment, he says.

By Sara Miller Llana