Argentina and the UK fought a short but bloody war over the British territory in 1982. The dispute received new life recently by Argentinean President Cristina Kirchener's launching a diplomatic war of words in an effort to eject the British.
Now it has emerged that the British have been planning to replace the aging ground-based system on the Falklands with a package including a battle management command, control, communications, computers and intelligence (BMC4I) system, a new missile and a radar.
As recently as December, unconfirmed reports emerged that Buenos Aires was in talks with the Russians over the possible lease of a squadron's worth of Sukhoi Su-24 Fencer attack jets in a move that would threaten Britain's control of the skies locally.
The reports drew a response from the UK Defence Ministry that it would adjust defense capabilities to the appropriate level to address any threats to the disputed islands, which the Argentinians refer to as the Islas Malvinas.
Britain has maintained forces on the island since the war. The force includes four Typhoon jets, Rapier missiles, naval assets and around 1,200 troops.
Last year, the British spent £63 million (US $95 million) for defense of the Falklands.
"We are currently assessing options to meet the requirement for future [short-range air defense, ground-based air defense]," an MoD spokeswoman said.
The BMC4I system will be "linked to the FLAADS(L) [future local area air defense system (land)] missile and launcher. This includes coupling to [Giraffe-Agile Multibeam] radars," she said.
The spokeswoman said it was not possible to say when the Falklands system would enter service, as the project, which is fully funded, is in only its assessment phase.
However, she was able to give some other key milestones for the project.
"Invitation to negotiate for the BMC4I system is forecast for summer 2015 and contract award is expected in summer 2016," she said.
"Our overall military posture in the South Atlantic is based on regular assessments of the threat and the Falkland Islands remain well-defended."
A BMCI system similar to the likely Falkland's requirement entered service with the British Army last October. The system, known as Land Environment Air Picture Provision (LEAPP), was built by Lockheed Martin UK in a £100 million deal the company signed with the MoD in 2008.
Industry executives said the limited number of LEAPP systems delivered may be the reason the MoD is pursuing a further procurement for the Falklands.
Richard Muir, the business development director at the Lockheed Martin UK Ampthill site, which leads the LEAPP work, said the system could provide air-space management and surveillance from five kilometers to significantly beyond 100 kilometers.
"The range of LEAPP is only limited by the radar," he said.
Despite LEAPP coming into service only in the last few months, the MoD spokeswoman said the BMC4I element of the system would be competed rather than just tacked on to the end of the LEAPP contract.
FLAADS(L) and the Saab-supplied Giraffe are mandated though.
Certainly, Lockheed Martin UK will bid. Other possible contenders include MBDA and Saab.
The Giraffe radar is already part of the LEAPP capability, although at the moment the sharp end of the system is provided by MBDA's aging Rapier missile.
That's due to change around the end of the decade.
The MoD spokeswoman revealed the ministry had signed a demonstration and manufacture deal with MBDA in late December for a replacement of the Rapier, which is FLAADS(L).
The land weapon is a derivative of the missile company's common anti-air modular missile; a naval version known as Sea Ceptor, which uses the same missile, has already been ordered for Royal Navy Type 23 frigates.
Argentina's neighbor, Brazil, and New Zealand have also ordered the naval weapon system.
The British effort to bolster its air defense capabilities on the South Atlantic islands comes as Argentina continues efforts to find a way of updating an Air Force that is pretty much flying the same aircraft as it did when it attacked the Falklands.
The financially hard-pressed Argentineans have made several attempts to buy second-hand combat jets, such as the Mirage 2000, without success.
Recently, Buenos Aires signaled interest in acquiring Saab Gripen NG fighters from a production line being set up in Brazil.
That came to nothing after the UK government warned they would block any sale by refusing to approve the export of the substantial amount of British technology used in the fighter.
Although media reports that the Argentineans are looking at the Su-24 have been denied by Buenos Aires, analysts in the UK said an eventual purchase of a credible combat jet could alter the balance of power in the South Atlantic.
Francis Tusa, the editor of Defence Analysis here, said recently the Gripen issue highlighted that if a deal of this nature went ahead, it would "dramatically and dangerously" change Britain's situation on the Falkland Islands.