'There is a point where Islanders will say to the Argentines, "To hell with you..."'

It is remarkable to see a senior British diplomat wearing a 19th-century colonial governor's uniform. The tight breeches and tunic, decorated with yards of brocade and fore-and-aft hat covered in white rooster feathers, tends not to suit today's corpulent diplomats. But in the Falkland Islands, governors are expected to display themselves in this fashion from time to time. Nigel Haywood is the latest to face this challenge.

Behind this quaint image is a man handling a job similar to that of a senior diplomat in a medium-sized country. Indeed, Mr Haywood has done just that in the recent past. He has been ambassador to Estonia and Consul-General in Basra. With a population of fewer than 3,000, plus some 1,200 men and women of the Royal Navy, Army and RAF who form the Falklands' substantial deterrent, the Falklands are tiny in comparison. But the complexity of their affairs and their possible effect on British trade, diplomacy and defence are considerable.

If the Governor had been hoping for a quiet time in Port Stanley, he must have been disappointed. He and his staff of just four Foreign Office officials have become extremely preoccupied with Argentina's rapidly, and perhaps dangerously, increasing campaign to take back the Falklands. Buenos Aires has insisted it will not use force, but it has imposed a shipping blockade on the islands, and has expressed outrage at the Duke of Cambridge's RAF posting to the garrison. Furthermore, Britain has been accused of militarising the South Atlantic

by planning to deploy a potent new destroyer to the area. As the 30th anniversary of the Falklands War approaches, the situation here is more tense than it has been at any time since 1982.

I had met previous governors, most notably Sir Rex Hunt, who came under a ferocious Argentine attack in this very building in April 1982. As I opened the door against that strong westerly wind, I wondered whether there were still signs of the battle. The wooden west wing where I was now had then been riddled with bullets and Argentine soldiers lay dead and wounded in the vegetable garden. But it appeared the damage had been patched and painted over.

Mr Haywood's office is comfortable, warm and dignified, with burnished old wooden furniture clustered around a coffee table at one end, and antique maps of the islands on the walls. It is said that General Menendez, the Argentine governor who deposed Sir Rex in 1982, so liked this room that he did not rearrange the furniture or even take the Queen's portrait off the wall.

We chatted about his love of trout fishing and wildlife that made him suited to such a wild place. This pleasant line of conversation was elbowed away by the spectre of the Argentine President, Cristina Kirchner. Surprisingly, the Governor called Mrs Kirchner by her first name. But that did not betray any warmth towards her. Indeed feelings towards "Cristina" had become more chilly recently, mainly because her gaze had settled on the Falklands' only commercial air link, the weekly Lan Chile service. This is vulnerable because it transits Argentine airspace and Cristina had said she was considering closing it down.

I asked the Governor whether he thought she would do so. He rubbed his chin thoughtfully. "How can I imagine that a country that sees itself as a major power and a member of the G20 can actually be threatening to stop an air link between two other countries?"

Mr Haywood agreed that such a move would represent a major escalation in what is being described as the South Atlantic Cold War. He pointed out that trade between southern Chile and the Falklands, thought to be worth about £8m to the Chileans, would be reduced to zero with one swipe. "Would Chile be happy about Argentina cutting off that service? I'm hoping countries in Latin America are beginning to ask whether Argentina's attitude is now getting to a stage where their pressure is just disproportionate.

"You can see that Argentine Foreign Minister [Hector] Timerman, Jorge Argüello, the ambassador to Washington and the rest are popping up everywhere and making statements. Argentina simply makes up things and presents them as fact, which is quite extraordinary. They will raise the Falklands issue at any international meeting."

Ambassador Argüello has taken the campaign to Twitter and his followers were being told that, "The British military are occupying the Islands against the Islanders' wishes." I asked the Governor whether he followed these tweets. No, he doesn't, but he is aware of the Argentine "facts" circulating on the internet.

The Governor's disdain for this strategy was clear, but so was his frustration. "If your only foreign policy appears to be 'Let's bang on about the Falklands', then that's quite difficult to handle," he said.

The blockade – everyone in the Falklands used the term – was the most tangible evidence of Argentine hostility. The Falklands' 20 or so ships that often needed to travel through or near Argentine territorial waters were frequently being hailed by Argentine coastguard ships and ordered to stop. The captains typically refuse, and the Argentines had not – so far, at least – enforced their demands. The Governor suggested they had shot their bolt. "What are they going to do now?" he said. "Fire across the bows? That would be a massive escalation."

So what is being done to keep the Argentines at bay? As if on cue, there was a roar of jets overhead. The Governor looked out the window, but the Eurofighter Typhoons from Mount Pleasant had gone long before their sound waves reached the ground. He cocked his head, as if to say, "There you have it."

The military deterrent is more important than ever. Each of the aircraft we had just heard could take on half a dozen Argentine Skyhawks and Mirages. They might not be able to stop a sudden full-scale air-and-sea attack, but even that would be at huge expense to Argentina, especially so when the powerful new Type 45 destroyer HMS Dauntless reaches the Islands.

UK diplomacy is more nebulous. The Governor conceded this with a little sigh. "It's quite easy for the Argentines to go to, say, Thailand, and say, 'Those Brits are occupying our islands.' But it's very difficult to counter that.

"What we do essentially is respond, even if we are responding first. Our ambassador may say to a foreign government, 'We know this Argentine person is coming to see you, so let's give you the background.' And that careful diplomacy produces quite invisible results. If Cristina has had a bilateral with a world leader, and the Falklands do not emerge as part of the communiqué, then nothing has happened. But that might have taken quite a lot of preparation by a lot of our people.

"We have a very robust policy in support of Falkland Islanders and their right of self-determination. There is an absolutely strong UK government and institutional view that says, if the Falkland Islanders want to remain British, we'll do everything possible to support that.

"We are trying to do several things. One very obvious one is correcting misconceptions which the Argentines are planting in people's minds about the history and about their claim, most of which simply does not stand up to analysis. There is a great deal of work going on to brief countries about the facts."

The Governor assumes a degree of fatalism. He said the Argentines had made a "miscalculation", and the more aggressive they became, the more Islanders and Britain would stand firm. "There is a point – and I think this Argentine government might have reached it – when the Islanders will just say, 'To hell with you. There are enough ways of connecting up the dots without involving you. We want to have links with the rest of South America, but if you're going to make it difficult, we don't care, we'll go and do something else.'"

Under a 1999 agreement, Argentina, Britain and the Falklands were to have co-operated over the exploitation of fishing and oil in the South-west Atlantic, both of which may soon make Islanders hugely wealthy. But the Argentines, it is claimed, have ripped this up. "They have said, 'No, we don't want to become rich if it means you becoming rich.' But the oil companies have found oil and if they now move on to starting to extract it, it will involve ships coming straight to the Falklands and going away again. Short of piracy, no one can stop that."

1982 revisited: Sir Rex Hunt

As the Crown's representative in the Falkland Islands, the governor acts as the de facto head of state.

The role was established in 1764 when French settlers landed on the islands, two years before the British, and is now usually filled by a senior diplomat with experience of overseas postings.

The most famous was Sir Rex Hunt who was governor during the Argentine invasion of 1982 and was captured by General Galtieri's forces and removed to Uruguay. Sir Rex, who has since retired to Yorkshire, was well known for travelling around the islands in his black cab.

For many years after leaving the post in 1985, Sir Rex served as chairman of the Falkland Islands Association and wrote a book, My Falkland Days, about his time in office.