LONDON – Prime Minister Gordon Brown said Friday he was "confident" diplomacy could resolve a standoff with Argentina on the Falklands, as islanders voiced disappointment at tensions over oil drilling.

"The diplomacy between us and Argentina is one that I think will be successful," Brown said, insisting that Britain was acting within international law.

"I think the work that's being done will avoid any tension".

The latest verbal skirmishes have been triggered by Argentina's decree that ships travelling through its waters to the Falklands -- home to 3,000 islanders and 1,000 British soldiers -- require an Argentinian permit.

They come with drilling on a new oil project due to start next week.

Argentina has accused Britain of raising the "spectre of war" for saying preparations had been made to protect the Falkland Islands, known as Las Malvinas in Spanish -- amid ramped-up sovereignty claims by Buenos Aires.

The two countries fought a 74-day war over Argentina in 1982 which cost 904 lives.

Brown's comments came as a statement posted on the Falkland Islands government website insisted oil drilling would begin as planned next week, "weather permitting."

"All the supplies the industry needs are located here in the islands and drilling will commence as planned, weather permitting," they added, saying they have "every right to develop a hydrocarbons industry within our waters."

"It is no surprise to anyone that Argentina is behaving in this way but it is nonetheless disappointing when they do," added the statement.