The Foreign Office has accused Argentina of "unacceptable harassment and intimidation" after a Cunard cruise liner was reportedly ordered to take down its British flag when it docked in Buenos Aires.

The captain of the Queen Victoria was told he faced a hefty fine if he continued to fly the red ensign – the flag of Britain's merchant fleet – while in the port, Channel 4 News reported.

The former head of the Royal Navy, Admiral Lord West of Spithead, who was a passenger on the ship, described the action as "an insult to the nation".

"After we'd gone round Cape Horn I was at dinner with the captain, and the captain said to me that when they were in Buenos Aires that the ship had basically been threatened with a very punitive fine – about 10,000 US dollars – and also told there would be 'trouble' in inverted commas – not specified – if he didn't take down the red ensign which the ship flies," he told Channel 4 News.

The incident comes against a backdrop of continuing sniping by the government in Buenos Aires over the sovereignty of the Falkland Islands, which Argentina has long claimed is rightfully theirs.

A Foreign Office spokesman said: "We condemn any attempts by the Argentine authorities to unnecessarily interfere with the legitimate transit of UK-flagged vessels. This appears to be another example of unacceptable harassment and intimidation.

"We robustly defend UK interests against any attempts by the government of Argentina to disrupt any lawful commercial activity. We are urgently discussing the matter with Carnival UK (Cunard's parent company) and will raise this with the Argentine authorities."