Britain declared today that it is satisfied that Argentina does not intend to continue active hostilities in the South Atlantic and said it therefore would return the last 593 Argentine prisoners it is holding.
But official sources said the government of Prime Minister Margaret Thatcher will continue other measures it has taken against Argentina.
The release of the prisoners followed an exchange of messages during the weekend in which Britain said that it had concluded, based on Argentine statements and actions, that the conflict was ended. Argentina replied yesterday and while not actually acknowledging that the British assertion was correct, did mention a "de facto cessation of hostilities" and said it would accept the POWs.
Argentina's military government described the release of the POWs by Britain and the lifting of economic sanctions by the United States, which was also announced Monday, as welcome. It reiterated, however, that it had not accepted a final cessation of hostilities in the South Atlantic, Washington Post correspondent Jackson Diehl reported from Buenos Aires.
Foreign Minister Juan Aguirre Lanari told reporters Monday morning that Argentina still maintained the position that while a "de facto" cessation of hostilities existed, no permanent peace would be recognized until Britain ended its blockade around the Falklands and agreed to negotiate with Argentina over sovereignty.
British measures being maintained against Argentina include restrictions on shipping in a 200-mile zone around the Falkland Islands as well as economic sanctions. In addition, plans have been disclosed for maintaining a garrison of about 2,500 men on the islands, along with surface ships, at least one submarine and Royal Air Force fighters to be stationed at the capital, Stanley.
"We will be maintaining a robust military presence," a Defense Ministry spokesman said.
The weekend exchange of messages, combined with what the Foreign Office said were "other recent indications we have received about Argentine intentions," led the British to decide that holding onto the prisoners would serve no purpose. The 593 POWs, including the former Argentine commander on the Falklands, Gen. Mario Menendez, are already on board a merchant vessel, the St. Edmund, and will head toward the port of Madryn on the Argentine mainland.
The British at first intended to keep the prisoners until Argentina formally affirmed that the war was over. It became clear, however, that such a pledge would be a long time coming from any Argentine government. The British then said that "positive indications" that the conflict was ended would be sufficient.
Last week, with the prisoners uncomfortably ensconced on the St. Edmund off the Falklands coast, the British decided that they would make, in effect, a unilateral declaration ending the hostilities and give up the prisoners if it was not contradicted by Argentina. This is what has now happened.
Official sources said there were two reasons for the British approach. The first was that keeping the POWs was becoming more trouble than it was worth. In the absence of a resolution of the problem, they would have had to be transported to Britain because there are no facilities for them on the islands. This, sources conceded, was unappealing and was questionable procedure under the Geneva conventions on the treatment of POWs.
The British government's second objective was to use the prisoner question to get as precise a reading as possible on the Argentine attitude toward the Falklands. A variety of statements emanating from Argentine military and civilian officials suggested that the junta would now pursue political and diplomatic means of gaining access to the islands, but could not say so directly.
According to senior officials, the Thatcher government is eager for the Falklands problem to recede, because of the high costs of maintaining a major military presence there and a desire to ease the strain in relations with many Latin American countries. In the coming months, officials say, assuming that there is no further sign of Argentine aggression, the remaining sanctions will be lifted. "This is a healing process that will take time, but there can be healing," one source said.
British officials have said repeatedly, however, that they will not consider opening negotiations over the future of the Falklands with Argentina. For the time being, any such moves would be regarded here as politically untenable. What may happen after the sanctions are lifted, sources said, would be gestures to encourage Argentine economic investment on the islands, tourism and possibly other interim steps to reduce the longstanding political tensions between the two countries.
The Foreign Office statement today said, "We ourselves are satisfied on the basis of the evidence available to us that the Argentine government accepts that active hostilities are at end, thereby enabling us to act on the release of prisoners of war in accordance with Article 118 of the Third Geneva Convention."
The Argentine statement, transmitted yesterday through the Swiss government, said the government "proposes in view of the present state of de facto cessation of hostilities, in line with Argentine statements and the practice followed previously for the return of prisoners, that the arrangements necessary for the reception in the Argentine port of Madryn of the prisoners of war still held under harsh conditions should be put into effect with the participation of the International Red Cross."
The Foreign Office rejected the Argentine reference to its "harsh" treatment of the prisoners as "offensive and unfounded."
The bulk of Argentine prisoners, about 10,500, were returned three weeks ago. The remaining group consists of ranking officers and specialists. Argentina's only British prisoner, a Harrier pilot, was released last week.
Correspondent Diehl added from Buenos Aires:
Political leaders and analysts here expect the return of the soldiers held by Britain--including Falklands commander Gen. Menendez and a number of ranking officers--to create new internal shock waves in a military already preoccupied with power struggles.
Menendez and other officers who served on the Falklands are expected to be greeted by military staff officers angry over logistical failures in Argentina's defense of the Falklands and by commanders questioning a strategy that allowed British forces to encircle most of Argentina's 11,000 troops with relative ease.
The field commanders, in turn, are seen here as likely to press their own complaints and to seek political influence in the new military government as a result of their service.
Aguirre Lanari said after meeting with Bignone at the presidential palace this morning that the release of the prisoners was "a positive move." But he said that Argentina "cannot accept any kind of conditions" on the soldiers' release, such as the full acceptance of a cessation of hostilities that Britain had earlier requested.
The foreign minister also announced the lifting of U.S. economic sanctions against Argentina without characterizing the measure.
Foreign Ministry officials characterized the U.S. action mildly as a welcome step but said that Argentina continued to await more concrete action on the part of the Reagan administration to reestablish cordial relations.
Government officials here have said they hope the United States will help Argentina in its current diplomatic effort to win new negotiations with Britain over the Falklands.
The Bignone government has signaled an interest in rebuilding cordial ties with the United States--if not the close alliance sought earlier this year by the government of Leopoldo Galtieri--despite the continued antagonism toward Washington in other military and civilian circles.
Aguirre Lanari, however, focused in his brief remarks today on the government's plan to continue pressing its diplomatic cause for the Falklands with Latin American and nonaligned countries.