The Argentine threat of legal action against the oil companies was anticipated in both London and Stanley, seat of the British overseas territory's government in the Falklands, and signaled further heightening of tension between Britain, the Falklands and Argentina.

Argentina has toughened its stance on the Falklands since the oil-prospecting agreements between the Falklands and British-based oil companies began taking shape last year.

Argentina and Britain went to war over the Falklands after an Argentine invasion of the islands. Britain beat back the assault and retained control, but Argentina has never relinquished its claim on the islands and has repeated its sovereignty claims amid energetic U.K.-led prospecting for hydrocarbons.

The Falklands dispute has coincided with a political crisis in Argentina over a bitter row between President Cristina Fernandez de Kirchner and the Central Bank and a related scandal over her husband's alleged use of insider information for a $2 million deal. Nestor Kirchner, the president's spouse and former president and ruling party leader, has denied wrongdoing.

The developing tense standoff between Britain and Argentina has fed into a fraught domestic situation over the Central Bank crisis, which led to the sacking of its governor, Martin Redrado, and his replacement by Mercedes Marco del Pont.

Analysts said the evolving confrontation over the islands had all the makings of a crisis that, if allowed to escalate, could help strengthen the domestic position of Fernandez.

Britain has been beefing up security on the islands and has been training military personnel on its bases on the territory, ostensibly for eventual redeployment in Afghanistan or Iraq.

The latest Argentine statements on the hydrocarbons exploration called on Britain to consider carefully the consequences of the full-scale oil exploration operations. Argentine Foreign Ministry sources quoted in the local media said the government was prepared to seek recourse to the highest tribunals -- a reference to the International Court of Justice at The Hague.

The sources told the media, "It's not accidental that the oil companies involved are British, that is to say, the only ones that can really believe the chimera that the U.K. is peddling about the alleged legality of these commercial operations," MercoPress reported.

Britain reiterated this week it "has no doubt over sovereignty over the Falkland Islands and surrounding maritime areas." The British Foreign Office says the Falklands government is entitled to develop a hydrocarbons industry within its waters and the U.K. supports the development.

Analysts said the situation could come to a head as a leased exploratory oil rig, Ocean Guardian, is scheduled to enter Falkland waters by Feb. 14. The rig was leased by Desire Petroleum but is likely to be shared with other prospecting companies.

Several more oil companies are likely to join the "oil rush" in the Falklands after the government received new applications for seismic and geophysical surveys.

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