Whilst the rest of the world speculates about the likelihood of a U.S. war with Iran in 2012, in Britain the New Year has been accompanied by some ominous news from their tiny overseas territory of the Falklands Islands.

Led by Argentina, who continues to lay claim to the islands they know as “Islas Malvinas,” South American nations including Brazil and Uruguay have united to ban ships flying the Falklands flag from entering their ports. Yet whilst in review, a resumption of armed conflict over the islands seems remote, such steps are hardly good news for the stability of the region, and puts British policy on this issue under pressure.

The roots of this fresh round of diplomatic pressure are not hard to identify: 2011 saw some controversial exploration of oil fields within the disputed islands’ sovereign ocean shelf — a potentially lucrative economic development which drew sharp criticism from Buenos Aires.

The new ban also highlights the significance of 2012 — which will mark 30 years since the Argentine military’s previous unsuccessful invasion of the territory. Ever since the 1982 war — in which Argentina suffered over 1,700 casualties — successive governments have battled to impose anti-British sanctions both at home and at the UN, with varying success.

Yet as Argentine diplomacy against the UK is nothing new — and the ban itself will affect only a handful of Falklands fishing vessels — why has this latest effort roused such concern?

The main problem is the financial crisis, and subsequent defense cuts to the UK’s Royal Navy. With Britain now lacking a carrier task force until at least 2020, pundits have noted Britain’s increasing inability to robustly threaten retaliation to an Argentine military attack.

Moreover, comparisons are being drawn between the lead-up to the 1982 war, where British ambivalence to its navy, it is claimed by some, emboldened Argentinean aggression.

So, will the UK be forced to once again go to war over the Falklands? Under review, despite British defense spending woes, the Islands remain garrisoned heavily enough to repel most of what Argentina could bring to bear. It would be a costly exercise — especially for over-stretched fuel-tanker and fighter jet resources — but Buenos Aires probably lacks the equipment to dislodge Britain by force.

Yet whilst this balance of power might rule out a surprise war, it does not negate the risk of further conflict. British Prime Minister David Cameron’s Christmas Day pledge was that, “We will never negotiate on the sovereignty of the Falkland Islands unless you, the Falkland Islanders, so wish.” Yet by ruling out all negotiation with Argentina, Britain is ignoring some genuinely deep running grievances.

Indeed, the support of Brazil in the latest ban is an ominous sign that Latin America as a whole does not really believe a population of 3,000 people in the South Atlantic has the right to claim UK citizenship. Accusations of colonial anachronism may be complicated by the fact Falklands Islanders legitimately want to stay British — but that does not mean the status quo is necessarily sustainable.

After all, in a world where, one by one, bad post-colonial borders are being un-done by a mixture of UN negotiation and bilateral diplomacy, British resistance to change may appear increasingly arrogant. So while Argentine threats to invade are probably far-fetched, the significance of this latest action may herald a difficult year for British diplomacy in the region.

A war of words, then, but one that could still hurt London in 2012.

Photo Credits: Mila Zinkova