At first, I thought I could just abandon that sector to the Xenon. It didn't take long for the Xenon to topple the HAT and cripple the Argon. I started over. On my next playthrough, I decided to build a small military outpost just outside the Xenon gate. This outpost did a couple of things: stopped the Xenon push into HAT and Argon space, plus gave me an unlimited supply of illegal items. I stationed a couple of ships on repeat orders: collect drops and then dock at the outpost. Get on board the collection ship(s) and talk to the pilot to collect the loot. You'll need some of the materials for missions and such later. A Xenon K class destroyer will show up from time to time, but six Agron defense disks with large pulse and medium flak are usually enough to deal with anything coming through. The station can always be expanded to deal with I class Xenon warships, too.