Iceland: Liberty Island in the Arctic

The active development of the system for Arctic policy since the beginning of the 2000s both on the national and international levels has greatly contributed to shaping the informal behavior of the many regional powers concerned. What kind of role does Iceland have, which until recently remained in the shadows of the “Arctic race”, chosen for itself? What are the challenges and opportunities that Reykjavik faces while implementing its regional strategy?

The active development of the system for Arctic policy since the beginning of the 2000s both on the national and international levels has greatly contributed to shaping the informal behavior of the many regional powers concerned. For example, Norway has positioned itself as a leader in Arctic oil and gas production and research. Russia can be regarded as the richest Arctic “pantry” of resources, while Finland has acquired the status of “workshop”, producing the most advanced ice technologies. At the same time, each country has more that one such identity. What kind of role does Iceland have, which until recently remained in the shadows of the “Arctic race”, chosen for itself? What are the challenges and opportunities that Reykjavik faces while implementing its regional strategy?

The Arctic as a Panacea for the EU

Iceland has never questioned its European identity, but has consistently displayed a sturdy antipathy towards the process of European integration. Together with Norway and Greenland, Iceland forms a very special group of resource-rich peripheral countries, whose relations with the European Union recall the dialectical antagonism between the “kulaks” and the “collective farm”, which seeks to impose on the former the egalitarian distribution of its resources. The intensive development of the fishing industry, which provides for 16% of Icelandic GDP and 40% of its exports, is of fundamental importance to the country’s economy [1].

Systematic differences between Reykjavik and Brussels on fisheries regulation in the North Atlantic are still an insurmountable barrier in relations between the two actors. They were the main reason for the failure of negotiations on Iceland's accession to the EU, which started in July 2009 at the initiative of J. Sigurðardóttir’s center-left government. The fact is that over the past few years, Brussels has insistently demanded Reykjavik reduce the volume of mackerel catch, which increased from 2,000 tons in 2009 to an unprecedented 146,000 tons in 2011, and agree to the terms of the EU Common Fisheries Policy [2]. In January 2013, Iceland did cut its quota to 123 thousand tons, but refused further concessions and suspended EU accession talks indefinitely [3].

Incessant “fishing wars” have contributed greatly to the growth of Euro-sceptic sentiments in Icelandic society, which readily responded to the action program of center-right parties that formed the coalition government after winning the April elections to the Althingi (Parliament of Iceland). On September 12, 2013, Icelandic Foreign Minister Gunnar Sveinsson said that accession negotiations with the EU were suspended and that Reykjavik would “improve communication and strengthen ties with the EU without actually joining” [4].

Photo: Xinhua/Rao Aimin
Chinese ex premier Wen Jiabao, in the company
of Icelandic Prime Minister Johanna
Sigurdardottir

It is noteworthy that during the process of negotiations to join the EU, Iceland has repeatedly drawn Brussels’ attention to possible joint action in the field of the Arctic exploration [5], thus trying to acquire concessions on fishing quotas. In particular, Reykjavik has planned to render all-around assistance to the EU in the latter’s striving for a permanent observer status in the Arctic Council. Given the considerable interest that Brussels had displayed to the region since the fall of 2007, the initiative was relevant. However, in practical terms, Icelandic efforts to become the champion of the EU interests were clearly late. Since the beginning of the 2000s that position had been firmly occupied by Denmark which even managed to overshadow Finland with the latter’s program “Northern Dimension”. As to the real political influence of Iceland in the Arctic, it appears insufficient to meet the current and prospective regional ambitions of the European Union. This is partly evidenced by the fact that in May 2013, the EU (unlike six other bidders) was denied the permanent observer status in the Arctic Council because of a lingering dispute with Canada over trading seal products [6].

There is no doubt whatever, that the failure to join the EU has made Reykjavik radically reconsider the true significance and potential of the Arctic as an external source of growth. This region offers ample strategic opportunities, which could help Iceland to overcome the negative consequences of the global financial crisis and revive the Icelandic “economic miracle” without undesirable entry into the EU. And judging by recent developments, this view is gaining ground in Icelandic party and political circles.

The Strategy in the Arctic Council

Iceland considers its position in the Arctic Council (AC) as an extremely significant issue and aims to promote the utmost strengthening of the organization in the development of the region. This approach is number one on the priority list of the Resolution on Iceland's Arctic Policy approved by the Althingi at the 139th legislative session on March 28, 2011. This document is also particularly notable for sharp criticism of the forum of the Five Arctic coastal States (Russia, the United States, Canada, Denmark and Norway), held in 2008 and 2010, which Reykjavik perceived as an attempt “to exclude it from important decisions and undermine the Arctic Council”. Having enlisted the support of U.S. Secretary of State Hillary Clinton, as well as other “discriminated” actors, namely Finland and Sweden, Iceland managed to put an end to meetings in the narrow format, originally proposed by the Danish Foreign Minister Per Stig Moeller in autumn 2007.

At the same time Iceland made significant efforts to implement a number of initiatives that, according to the country’s Ministry for Foreign Affairs, were of decisive importance for the development of the Arctic Council’s potential. These include, in particular, the May 2011 signing of the Agreement on Cooperation on Aeronautical and Maritime Search and Rescue in the Arctic, as well as the establishment of a permanent Arctic Council secretariat in Tromsø. Icelandic diplomatic efforts were particularly intense in making the latter project a reality, which, in a way, has been confirmed by the appointment of former Secretary General of the Ministry for the Environment Magnús Jóhannesson as the first Director of the newly established administrative body.

Iceland Draws the “Arctic Circle”

Photo: www.nesskip.is
Nesskip boat, Iceland

In 2013, Iceland hosted a major event in the international Arctic policy, namely the first open assembly of the “Arctic Circle”, introduced by President Ólafur Ragnar Grímsson of Iceland on April 15, 2013, at the National Press Club in Washington [7]. The stated mission of the Arctic Circle is to provide an open platform for the free participation of all non-governmental organizations, scientists, corporations and governments of various countries who have taken an active interest in the Arctic [8]. China, South Korea, Singapore and India formed a special non-regional group for which the assembly offered an unprecedented opportunity to express their positions on topical issues of Arctic exploration. Under this initiative Ólafur Grímsson has gently tried to oppose the democratic and advanced “Arctic Circle” concept in favor of a more closed and “inimical” environment of the Arctic Council, where permanent observers have little chance of participating directly in the process of discussing vital issues.

The “Arctic Circle” conference took place on October 12-14, 2013, as had been initially scheduled. We should emphasize a few key points about the event itself.

Firstly, the inclusive nature of the event proved to be beyond any doubt in terms of the scope of issues discussed as well as the number (about 1200 people) and composition of participants. Judging by the agenda, we can conclude, that discussions of socio-humanitarian and environmental issues prevailed [9].

However, it should be noted that this aspect usually prevents the constructive discussion of the economic development prospects of the region. Moreover, the organizers’ attempt to “embrace the unembraceable” in a relatively short time produces indeed a visible external effect, but does little in terms of making the discussion meaningful.

Secondly, it is interesting to note that apart from the topics relevant to the Arctic, the assembly considered such specific issues as Chinese and Indian approaches to the melting of glaciers in the Himalayas [10]. Mr. Grímsson suggested that creating conditions for dialogue between the two Asian powers on this issue could contribute to improving strategic relations between Beijing and New Delhi.

Thirdly, in his address to the Conference, Minister for Foreign Affairs Gunnar Bragi Sveinsson made a number of statements that are fundamentally important for institutionalizing Icelandic Arctic policy. It was announced that the Icelandic government had decided to establish a Committee of Ministers on Arctic Affairs, focusing on policy coherence and activities program of the country’s regional strategy [11]. This explains why the search for means to finance future projects has become an urgent necessity for Reykjavik. Despite limited financial resources, Iceland intends to put the Arctic on the agenda of its foreign policy dialogue with the European Union and countries of Asia as well as strengthen economic and trade cooperation with its closest neighbors, the Faroe Islands and Greenland. The first results in this sphere have already been achieved: in April 2013, the Icelandic-Arctic Chamber of Commerce was established [12] and in July of the same year, Iceland opened its General Consulate in Greenland’s Nuuk [13].

Ice Union of Two Dragons

Photo: Flickr/ randite
Yelena Stoudneva:
Russia and Iceland: Arctic Gravitation

Intensified activity of Iceland in pursuing its Arctic policy was largely prompted by the Chinese aspiration to participate in the development of regional resources, which became particularly evident beginning in 2010.

The state visit of the Premier of the State Council of the People's Republic of China Wen Jiabao to Iceland in April 2012 can be considered the start of the Reykjavik-Beijing strategic partnership in the Arctic. During the visit a package of documents was signed that laid the foundation for bilateral cooperation in a number of industries. The most significant of them is the Framework Agreement on Arctic Cooperation, within which the Chinese government in August of the same year established the Sino-Nordic Arctic Research Center in Shanghai [14]. According to Xinhua news agency, the main spheres of activity of this expert institute include strengthening political, trade and economic ties between the countries of Northeast Asia on the one hand and Nordic Europe on the other, analyzing strategies and opportunities of mutual cooperation, as well as studying the climate and environment of the Arctic [15].

The signing of Free Trade Agreement on April 15, 2013 became another landmark in relations between Beijing and Reykjavik [16]. The Icelandic political elite were particularly pleased by the fact that their country was the first in Europe to lift all trade barriers in relations with the second largest economy of the world. This agreement creates real prerequisites for mobilizing and strengthening the export potential of the Icelandic economy, which, in turn, should help the country to overcome the negative effects of the global financial crisis.

Links of the Transport Chain

Transport and trade offer the best opportunities for Arctic cooperation between China and Iceland. Due to its central position in the North Atlantic, Iceland can become a great transit hub, serving prospective transit shipping between Europe/East Coast of North America and Asia along the Northern Sea Route (NSR). Incidentally, in February 2005 the Ministry for Foreign Affairs of Iceland issued a report [17], covering a detailed feasibility study for making Iceland an Arctic logistics center. The analysis identified three optimal locations for possible transshipment ports: Hvalford in the West, Eyyaford in the North and Reydarford in the East. However, the report's authors emphasized that the construction of necessary transport infrastructure should not be started until commercial shipping along the Northern Sea Route displayed continued growth. Naturally, against the background of the crisis, Iceland cannot afford to finance such costly projects, and Reykjavik is pinning great hopes on investments from abroad, first of all from China.

Beijing takes the issue of potential cooperation with Reykjavik in the Arctic shipping very seriously. Thus, Minister-Councellor of the Embassy of Iceland in China Ragnar Baldursson, speaking at an economic forum in Beijing in spring 2011, noted “great changes” in international shipping routes resulting from climate change and new ice technologies. Among other things, he emphasized Iceland’s confidence that in the foreseeable future there would be a new shipping line established between the Pacific and North Atlantic regions, shortening the voyage between the ports of China and Europe/North America [18].

In mid-August 2012, the Chinese icebreaker R/V Xuelong, carrying the fifth Chinese National Arctic Expedition, berthed at an outport of Reykjavik and hosted a seminar on Arctic cooperation between the two countries [19]. During the discussion, special attention was paid to cooperation between Iceland and China in the field of the Arctic shipping.

On September 17, 2012, the head of China's largest shipping company COSCO, Wei Tszyafu, announced that in 2013 his company plans, together with the Icelandic shipping company Nesskip and the Ministries of Transport and Foreign Affairs of Iceland, to begin long-term strategic research about the economic efficiency of Arctic shipping between China and Iceland, primarily along the Northern Sea Route. He also expressed a readiness to share the results of the research with Icelandic partners [20]. In an interview with Lloyd's List weekly, Captain Wei specified the main directions of Sino-Icelandic cooperation in the sphere of transport, i.e. container traffic, reduction of CO2 emission, energy-saving technologies, and shelf development [21].

As planned, during the navigation season of 2013 COSCO sent dry cargo ship Yong Sheng along the Northern Sea Route to deliver parts of a port crane and several containers from Taicang to Rotterdam. Now it remains to be seen what final conclusions Chinese ship-owners will make about the results of the Arctic voyage. If they prove sufficiently positive, and the share of Chinese carriers in the total volume of transit shipping along the NSR begins to increase, the prospect of turning Iceland into a new transport and logistics hub in the Arctic will begin to take shape and make economic sense. In this case, Russia should multiply its efforts to become involved in the Icelandic-Chinese dialogue and ensure that its exclusive economic interests in the use of the NSR are duly recognized by both Beijing and Reykjavik.

1. Magnason S. Growth in Iceland's Fisheries // Nora Region Trends. 13.06.2013. URL: http://www.noraregiontrends.org/marineresources/marinenews/article/growth-in-icelands-fisheries/193/neste/1/

2. Iceland cuts mackerel quota but fails to meet EU demands 05.02.2013 // URL: http://www.eubusiness.com/news-eu/iceland-fishing.m5b/

3. Iceland lowers mackerel quota to appease EU. // EurActiv. 04.02.2013.URL: http://www.euractiv.com/enlargement/iceland-lowers-mackerel-quota-ap-news-517545

4. Iceland suspends EU accession talks indefinitely. // Eurobusiness. 12.09.2013. URL: http://www.eubusiness.com/news-eu/iceland-membership.qh1

5. См. напр.: Accession is a logical next step // European Voice. 23.07.2009. URL: http://www.vidraedur2009-2013.is/media/bladagreinar/2307_EPV_001_009.pdf

6. A warmer welcome. // 18.05.2013. URL: http://www.economist.com/news/international/21578040-arctic-council-admits-its-first-permanent-asian-observers-warmer-welcome

7. NPC Luncheon with Olafur Grimsson. 15.04.2013. URL: http://press.org/news-multimedia/videos/npc-luncheon-%C3%B3lafur-gr%C3%ADmsson

8. Reuters. http://www.reuters.com/article/2013/04/15/us-arctic-circle-idUSBRE93E1A320130415

9. http://www.arcticcircle.org/agenda

10. Koring P. New Arctic Group Gives Canada Political Competition // The Globe and Mail. URL: http://www.theglobeandmail.com/news/politics/new-arctic-group-gives-canada-political-competition/article11243970

11. Sveinsson G. Iceland´s Role in the Arctic – The Future of Arctic Cooperation // Icelandic Ministry for Foreign Affairs. 14.10.2013. URL: http://www.mfa.is/media/nordurslodir/Arctic-Circle-speech-October-14-2013.pdf

12. http://www.vi.is/english/service/general-safeguarding-of-interests/icelandic-arctic-chamber-of-commerce/

13. http://www.noraregiontrends.org/internationalpoliticsnews/article/iceland-opens-general-consulate-in-nuuk/87/

14. Agreements and declarations signed following a meeting between Prime Minister Jóhanna Sigurðardóttir and Premier Wen Jiabao in Reykjavik today. // Prime Minister's Office of Iceland. http://eng.forsaetisraduneyti.is/news-and-articles/nr/7144. 20 April 2012.

15. China to open International Institute for Arctic studies. // Xinhua News Agency. http://www.china.org.cn/china/2012-08/ 19/content_26277264.htm. 19 August 2012.

16. The Free Trade Agreement between the Government of Iceland and the Government of the People's Republic of China. // Icelandic Ministry for Foreign Affairs. 15.04.2013. URL: http://www.mfa.is/media/fta-kina/Iceland-China.pdf

17. North Meets North. Navigation and the Future of the Arctic // Icelandic Ministry of Foreign Affairs. July 2006. URL: http://www.mfa.is/media/Utgafa/North_Meets_North_netutg.pdf

18. Daily Mail. 03.09.2011. URL: http://www.dailymail.co.uk/news/article-2033509/Fears-China-s-Arctic-ambitions-tycoon-makes-100-million-Iceland.html

19. Ibidem.

20. COSCO steps up Arctic interest. // Bunkerworld. http://www.bunkerworld.com/news/i116033/ Cosco_steps_up_Arctic_interest#. 17 September 2012.

21. COSCO seeks to study Arctic shipping with Iceland. // Lloyd's List. http://www.lloydslist.com/ll/sector/ship-operations/article407505.ece. 17 September 2012