Þetta er síðari hluti greinar sem ég skrifaði í Grapevine – fyrri hlutann mátti lesa hér á vefnum fyrir hálfum mánuði.

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A TIME OF CONFUSION – ICELAND AND THE REST OF THE WORLD, part II

By Egill Helgason

In part I of this series, ‘Iceland and the rest of the world,’ I traced the history of Iceland from its time as a poor Danish colony to becoming independent, hosting a US military base and becoming Americanized—while still doing business with the Soviet Union—to the nation’s brief stint as world financiers buying up all of the shops on High Streets of the UK. Since the 2008 crash much has changed, not the least Icelanders’ attitudes to other countries.

It could even be said that this quite large, but sparsely populated, island in the north has been set adrift on the world seas. Icelanders are at the moment very confused about where to look in global politics. True, Iceland applied to join the European Union in the summer of 2009, but negotiations have been very long winded, partners have yet to start discussing the crucial chapters on fisheries and agriculture, and the whole thing now seems quite hopeless.

NATIONALISM VS. THE EU

With the euro crisis and the rise of extremist politics, not to mention a dispute with Iceland over profitable mackerel fishing, the European Union does not seem very alluring. In fact, latest polls show that a great majority of Icelanders are against joining the EU and many favour ending the negotiations. If the talks are concluded, however, there will be a referendum, possibly in 2013. Most likely the outcome will be a resounding no.

Iceland has long been suspicious of foreign powers. Nationalistic sentiments are rife—and some politicians are quite adept at playing upon them. The left wing movement in Iceland has long been more nationalist than socialist. Thus the debate on the EU can be quite extremist, with opponents comparing the EU to the Soviet Union or the Third Reich. One of the claims is that the EU would take over Icelandic resources, mainly energy and fish, and thus we would end up being a colony of Brussels.

In some ways this is a rerun of the debates about the US bases in the ’50s and ’60s—then the largest and most divisive political issue—but this time nationalist forces on the left and the right have joined together, their real leader being President Ólafur Ragnar Grímsson, who is now fighting for his fifth term on a very nationalistic ticket.

THE GREAT POST-CRASH ISSUE

Another reason for the unpopularity of the EU is the Icesave issue. When the Icelandic banks collapsed in 2008, the parliament passed emergency legislation that put most of the losses on the backs of foreign creditors who had lent money to the banks. This could not have been done otherwise; Iceland simply did not have the money to prop up the banks. Thus foreign creditors suffered losses amounting to almost 10,000 billion Icelandic krónur. For the most part these were German banks which, in fact, accepted these losses quite gracefully.

But one obligation stood out and this soon became the overriding political issue of the post-crash era. When the Icelandic banks first ran into trouble in 2006, they couldn’t really borrow any more money. So they found a solution—considered ingenious at the time—which involved founding online savings accounts in neighbouring countries that offered very tempting interest rates. Landsbanki bank’s so-called Icesave accounts in the UK and Holland became especially popular.

This gave the banks a few more seasons to live, but the question of who would pay if the banks collapsed went unanswered. Somehow the Icelandic and the UK financial authorities managed to evade this issue (after the crash it came out that insiders had already in 2006 known that the collapse of the banks was inevitable). In October 2008, Landsbanki bank went bust, and the UK and Holland governments pointed at Iceland and said, you have to pay! The EU followed suite and so did Iceland’s supposed best friends, the Scandinavian governments.

At the time this seemed like an exorbitant sum and many Icelanders felt that they shouldn’t pay for the excesses of bankers and the stupidity of politicians. However, Iceland was under great pressure from the UK, Holland and Europe. Two times the government signed agreements to pay and these were passed by parliament, but then vetoed by President Ólafur Ragnar Grímsson who was by then taking a more active part in politics than any president before him. Both agreements were then voted down in referendums.

Now the issue is before a special court, convened through the EEA agreement, which is like a part EU membership for Iceland and Norway. If this court rules against Iceland, the EU will likely become more unpopular still (although that verdict will perhaps not be so terrible, as it is now clear that the former Landsbanki has funds to meet the Icesave obligations).

THE DULL SCANDINAVIANS

Many Icelanders think the Scandinavian countries failed us at the time, even if they put up a lot of the money, which was eventually used to rescue Iceland through the International Monetary Fund.  But then, at the time, Scandinavians had grown very fed up with the arrogance of newly rich Icelandic financiers who seemed to think that Scandinavians were slow and dull witted. A report by the Icelandic Chamber of Commerce in 2006 stated frankly: “We have nothing to learn from Scandinavians as we are better than them in every field.”

Things have changed since then. Scandinavia now appears as a beacon of stability. Icelanders tend to be far more volatile and excitable than the Scandinavians. Icelandic politics are for example very quarrelsome, which is a far cry from the consensus driven politics of Scandinavia. So in a time when there is much anger and mistrust, Scandinavia looks better than before, not least Norway with its great oil wealth. A lot of Icelanders have been going there over the last few years in search for better paying jobs.

It is said that the inhabitants of Iceland originally came from Norway, fleeing King Harald the Fair-haired and his over-taxation. Now it seems they would gladly join Norway again, and there has even been speculation about Iceland joining a federation with Norway or adopting the Norwegian króna. Admittedly, the Norwegians do not seem very interested.

ENTER THE CHINESE

After the crash Icelanders started looking for friends in new places. President Ólafur Ragnar had long been cultivating relations with China, going on visits and receiving Chinese dignitaries. Some say that he has been to China more often than he has been to the EU. Ólafur Ragnar has been quoted saying that China showed friendship in times of peril, while other countries treated Iceland unfairly. That is his version of what happened, and he no longer hides the fact that he is an opponent of the EU.

This has come to a head with the attempts of a Chinese billionaire, Huang Nubo, who tried to buy a large tract of land in northeast Iceland to build a resort for Chinese tourists. This land is really in the middle of nowhere; it is mostly mountains and desert sands. Building a resort there seems like an outlandish idea. Huang’s proposal to buy the land was turned down by the Minister of the Interior, but now he is trying to lease it for a long time. This has given rise to much speculation about his real intentions with some wondering if they have to do with China’s drive toward the Polar region. Although the area is totally landlocked, there has been talk of the Chinese wanting to build a listening post or an airport, which would not be under Icelandic rule, and even that this will develop into a fully fledged colony with Chinese growing rice in the Icelandic north. Some of this sounds like it could be coming straight out of a Bond movie – Dr. No does not seem especially welcome in Iceland.

THE NEW NORTH

In Iceland, especially among those who are opposed to EU membership, it is popular to speak of the New North. The idea is that as the Polar Seas open up with global warming there will be great opportunities in oil, mining and transportation. Iceland lies on the periphery of the Polar region and has no real claims to its resources. But if a shipping route open up, Iceland would be on the way and plans have been drawn up to build a transit port in the northeast of Iceland. The Chinese would probably have to be involved, for most of the traffic would come from there, but monitoring this traffic and ensuring its safety would be beyond the means of such a small country. This would have to involve a larger entity, like the EU or even the US. Some old admirers of the US even dream that these changes will bring the Americans back to Iceland, which they abandoned in 2006.

Those who advocate for the New North even have ideas of forming an alternative union to the EU with members such as Norway, Greenland, Canada, and perhaps other northern countries. Canada’s role in this scenario is interesting as a sizable part of the Icelandic population emigrated there in the late nineteenth century. There has also been talk of Iceland getting rid of its unstable króna and adopting the Canadian dollar, called the loonie. We don’t know what the Canadians themselves think about this, as they haven’t really been asked. Perhaps this shows how confused Icelanders are about their place in the world.