Memories of Britain’s 1982 war with Argentina over the Falkland Islands may have faded in London but the wounds in Buenos Aires remain fresh: an image of the islands in the blue and white of the Argentine flag was beamed on to the national congress building on the 40th anniversary this month of the military dictatorship’s ill-fated invasion, along with the totemic phrase “Las Malvinas son y serán argentinas” (“The Falklands are, and will be, Argentine”).

Recovery of the south Atlantic territory remains a national obsession, featured on everything from banknotes to road signs and tattoos. Cristina Fernández de Kirchner, the country’s firebrand vice-president and former leader, brought up the Ukraine crisis when speaking about the Falklands last week. Her belief that Britain occupies the south Atlantic islands by force led her to criticise “double standards” by western powers which, she claimed, were selective in their condemnation of invasions.

Such talk may have pleased Moscow, which promptly called for the UK to restart sovereignty talks with Buenos Aires. But it only feeds the islanders’ suspicions of Argentina. They feel threatened by the current constitution, which vows to recover the Falklands and exercise full sovereignty. They complain that Argentina sees them as a colony of immigrants with no right to self-determination, instead of respecting their desire to remain British.

With Argentina resolute in its claim to the islands, and the islanders equally emphatic in rejecting any change to their status as a self-governing British Overseas Territory, the issue of sovereignty remains as intractable as ever. That dispute threatens to overshadow progress in other areas.

Over the past 40 years, the Falklands economy has boomed on the back of fishing and tourism, something Argentina has acquiesced in. This has generated previously unheard-of prosperity and drawn in a wave of migration that has raised the islands’ population to around 3,400 from below 2,000 before the conflict.

Argentina and the Falklands have also co-operated over humanitarian issues, allowing the remains of more than 120 Argentine war dead to be identified.

Yet too much remains prisoner to the passions raised on both sides by the events of 1982, which cost a total of 907 lives.

Direct air links from the Falklands to Buenos Aires have not been resumed. No shipping service connects the islands with the mainland, 400 miles away. Mothers likely to have complicated births have been transported nearly 8,000 miles on military flights to hospitals in the UK. A garrison of 1,200 British military personnel stand guard over the islands.

Perpetuating this stand-off is in nobody’s interest. Setting aside the thorny issue of sovereignty, more could be done to build confidence between Argentina and the Falklands and create a more normal relationship.

Restarting direct flights between the islands and Argentina’s capital would be a good first step, allowing both populations to get to know each other again and to build trade. Cooperation on tourism would help both sides take advantage of the boom in visitors to Patagonia and the Antarctic.

Finally, Britain could lift its arms embargo on Argentina, a fellow G20 economy and democracy of nearly 40 years’ standing, and reduce the size of its Falklands garrison. This would send a powerful signal to Buenos Aires and to the islands that London wishes to see more normal and neighbourly relations in the south Atlantic.