But defence officials insisted there was "friendly dialogue by radio" between the ships, amid a growing sovereignty row with Buenos Aires over the islands which are ruled by Britain but claimed by Argentina.

Britain's Ministry of Defence also declined to comment on a report in the Sun newspaper that a submarine had been sent to the Falklands, but added it was not increasing its forces in the area.

"We can confirm that on 28 January this year during rough weather and at night, HMS York and an Argentine ship were operating in the same locality," said a ministry statement.

The incident happened in international waters around 50 miles from the territorial waters of the Falklands, known as the Islas Malvinas in Spanish, said the ministry.

"After a friendly dialogue by radio they each continued with their own exercises," said the statement.

The Falklands are at the centre of a dispute between London and Buenos Aires after three British oil companies announced drilling plans off the islands, over which Argentina and Britain fought a short war in 1982.

The Sun newspaper reported the York monitored the progress of the Argentine warship ARA Drummond before radioing the vessel to change course.

The paper said the ship had entered a so-called conservation zone, the area where Britain is carrying out oil exploration.

The Ministry of Defence would not comment on a report in the Sun that a submarine had been dispatched to the islands, but said forces in the Falklands had not been increased.

"We do not comment on (British) submarines," said the ministry.

"Our force structure remains unchanged and is being maintained at routine levels," it added.

In Caracas, Venezuelan President Hugo Chavez on Thursday said that if the submarine report was true, then "there is a real threat of the use of military force from the old worm-eaten English empire.

"If it is true," Chavez said at a press conference, "this is ridiculous."

Chavez reiterated his support for Argentina over the Falklands controversy.

"There is no reason that justifies the United Kingdom maintaining its colonial domination over the Malvinas islands," he said.

Latin American and Caribbean leaders meeting in the Mexican resort of Cancun on Tuesday called for fresh talks on the sovereignty of the Falklands Islands.

Drilling off the Falklands aims to determine the oil potential of the British waters, with estimates they could be home to somewhere between 13 and 60 billion barrels of oil.

British oil exploration firm Desire Petroleum this week started drilling in waters off the Falklands, which are located 450 kilometers (280 miles) off the Argentine coast.

Argentine troops staged a surprise landing on the Falkland Islands to assert their claim to the territory on April 2, 1982, prompting a 74-day, bloody war with Britain in which 649 Argentine troops and 255 British soldiers died.

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