REQUIEM FOR A GLACIER: Recovered Iceland Faces New Challenge

In the past decade, Iceland’s economy has reflected its climate. The crippling financial crisis of 2008 was like the dark winter months, with barely a daily average of six hours of sunlight. Today, the volcanic island’s economy is enjoying a spectacular (some would say miraculous) recovery akin to the 20 or more hours of sunshine of an Arctic summer’s day. The road back, as described to Diplomatic Connections by Iceland Ambassador Bergdis Ellertsdottir, required tough austerity measures, resilience, and a lot of luck. When the U.S. sub-prime bubble burst in 2008, Iceland’s private banks were caught badly overextended in the capital market and collapsed, bringing financial disaster. The krona lost half its value in the years up to 2010, and the country’s GDP plunged by 15 percent – the biggest drop by a wealthy country during the crisis. “The first years were very difficult,” recalled the ambassador, a career diplomat who was posted to Brussels at the time. “There were cuts in everything.”

New banks were set up, hemmed in by capital controls that were not removed until 2017 to prevent a repetition of the foreign adventurism that had led to the earlier disaster. The International Monetary Fund agreed to a $2.4 billion bailout, and the Reykjavik government kept tight rein on spending. But that was then. Iceland is now enjoying an economic revival powered by technology, renewable energy, and a tourism boom – the lucky break mentioned by Ambassador Ellertsdottir. Iceland received 2.3 million foreign visitors in 2018, including 800,000 Americans. Output per head is among the strongest in Europe, and the employment rate is the highest in the world.

Of major concern for Iceland these days is how to deal with the climate change threat. Melting ice from the Arctic is raising sea levels and threatening to submerge low lying islands as far away as the Pacific. Recently, Icelandic scientists unveiled a large plaque on the site of the first glacier melted by global warming. The plaque warned: “In the next 200 years all our glaciers are expected to follow the same path.”     
   
The ambassador said there was increased international interest in Iceland, Greenland, and the Arctic region as melting glaciers and icebergs opened up the seabed to mineral exploration, and promised new maritime sea routes where before there had been none.

Diplomatic Connections: Could you please comment on the fact that in the polls Iceland is always listed as one of the happiest countries?
Ambassador Ellertsdottir:  I think in a way it may be easier to be happy in a small community than a very big one. I think people in Iceland are less isolated socially; there’s much family closeness: you may pop in to your mother for coffee every day even. Whereas in bigger countries people are living in different areas, so the closeness is not there. The fact that you have a safety net in your family accounts for some of the happiness. Sometimes people say Icelanders are the Italians of the North; we are happy-go-lucky people. It’s also something in the DNA, because life is a bit predictable: we have volcanic eruptions, bad weather conditions. Also, our economy is stable, the average income is high, you have the welfare system. All of these factors, of course, come into play.

Diplomatic Connections:  How does a country like Iceland, with 335,000 population, hang on to its identity at a time of the dominance of English through the social media, and as its rapid spread as the main language of business and communication?
Ambassador Ellertsdottir:  This is a challenge, and has become more so with social media. I have kids and they communicate in English in social media even with their Icelandic friends. The language has been the basis of our identity, based on the Icelandic sagas, and we are proud to say that we still read and speak the language of our forefathers, of a thousand years ago. But this poses a challenge to safeguard the language. Part of it has been when we need a new word, we don’t reach for the English word, but we create a word. Our Nordic friends would use the English word for telephone, whereas we would say simi, which is a word we invented. The same with computer: we don’t use computer, we say tolvu. That has been a very important element of preserving the language.

Diplomatic Connections:  Has that worked?
Ambassador Ellertsdottir:  It has worked up to now. The problem today is that young people don’t read books. There’s been a lot of effort put into this issue in Iceland: how to interest kids in reading, so parents are encouraged to have reading nights. Particularly with boys this seems to be a challenge – they’re very much online, playing games. We’ve always prided ourselves on being a very literate nation. Every year, there are more books published: we give books for Christmas. So this used to be very much our identity – to be this book nation. But it is a challenge with young people. There is so much distraction. When I was growing up there was nothing. There wasn’t even television every day.

Diplomatic Connections:  How close are the Nordic nations really? Do Icelanders tend to emphasize the differences, or the similarities?
Ambassador Ellertsdottir:  When we’re together, we focus on the different areas. But when we are, as here in the U.S., presenting the Nordics as a group of five, then we look at similarities. Icelandic is a Nordic language, even if it’s different from Norwegian, Swedish, and Danish, and we learn Danish at school, as a foreign language. It used to be the first language that we learned, but now it’s English.

Diplomatic Connections:  The Iceland economic picture is very positive, you might say miraculous, considering the financial collapse of a decade earlier. Could you walk me through the process of recovery?
Ambassador Ellertsdottir:  The first years were very difficult. There were cuts in everything. There were cuts in the government sector – hospitals and schools. A lot of people lost their homes, and there were restrictions put in place in the financial market. The banks had collapsed, and new banks were established, but these banks are not as internationally active as the old banks were, which was, of course, part of the problem. The government took very difficult steps in order to recover from the crisis. At the time I was (posted) in Brussels, and it was very dramatic to see the whole country on the verge of collapse. My predecessor, (as ambassador in Washington, Geir Haarde) was prime minister then. In the U.S., it’s very common for a politician to say “God Bless America,” but in Iceland, politicians never talk about God. But Haarde made a statement on television, and he said. “My dear countrymen, (the country) is in a state of collapse. God bless Iceland.” And then we knew that the situation was serious. With the efforts of the government, and of the Central Bank, and the restrictions on financial movements, all of that gradually made it possible for us to recover. But we were also lucky. For a number of reasons tourism started booming: the percentage went up so fast, and it really was a savior, this enormous growth of tourism in Iceland. And, still today, it’s our biggest industry.

Diplomatic Connections:  Why did it happen at that point? Were you really pushing tourism?
Ambassador Ellertsdottir:  We were pushing it, but we had been doing that for a long time. I think it shows that sometimes bad news can also put the spotlight on a country. With the financial crisis, for the first time in history we were all over the international press. People who before didn’t know Iceland or even know where Iceland was, all of a sudden were reading articles about us. Secondly, there was that infamous volcanic eruption, when ash blacked out visibility, and closed the airport for some days, and this also put us on the front pages of the international media, which doesn’t often happen to a small country in the midst of the Atlantic. So – different factors. And then there was the rise in tourism, world-wide.

Diplomatic Connections:  How many tourists does Iceland get every year?
Ambassador Ellertsdottir:  I think about three million; and 800,000 come from the United States, and it’s the single biggest group. Iceland Air has between 14 and 18 destinations in the U.S.

Diplomatic Connections:  How would you characterize U.S.-Iceland bi-lateral relations. Is there something you would especially like the Americans to do that they are not doing?
Ambassador Ellertsdottir:  We have historically a very close relationship with the U.S., and we’ve always valued the U.S., as our closest partner in particular when it comes to security and defense. There was an American base in Iceland from World War II until 2006. In the last years relations have intensified. We feel the U.S. government is much more focused on Iceland - and on the north in general – than some years back. This is evidenced by the fact that we’ve had both Secretary of State (Mike) Pompeo and Vice-President (Mike) Pence in the last few months. When Vice-President Pence went to Iceland in September, it was the first visit at such a high level for more than a decade. We feel that this administration is more interested in the North Atlantic, the Arctic, and Iceland, and you also see increased focus on Greenland, and relations with Norway and Denmark. We’re very pleased that the Americans have noticed us again in the middle of the Atlantic, and our important strategic role. This has influence on other bi-lateral issues. We’ve had many visits from senators and (Congressional) Representatives from here to Iceland in the last year or so. Also very important is the interest of American business in Iceland. In October, when we had the Arctic Circle Conference we had a delegation of 60 from Maine, we had (Energy) Secretary Rick Perry, former Secretary of State John Kerry – all of this is a sign of more interest, and the development into a deeper relationship.

Diplomatic Connections:  Iceland is a member of NATO, but not with military participation. So what is it that you bring to the alliance?
Ambassador Ellertsdottir:  We try to contribute in as many ways as we can. We have some civilians on mission in Iraq and Afghanistan. We also have people working in Norfolk, Virginia. After 2006 (when the U.S. closed its airbase in Reykjavik), Iceland has taken over the radar station and the surveillance of ships, and submarines and flights, in our area, and they are now the responsibility of the Icelandic Atlantic Coastguard. We have a regular strategic dialogue with the U.S.

Diplomatic Connections:  Following the closing of the U.S. base in 2006, is there an American military presence in Iceland?
Ambassador Ellertsdottir: No, but we do have a bi-lateral defense agreement with the U.S., which is still valid. There is some infrastructure there “in case of,” but no permanent military footprint.

Diplomatic Connections:  And yet there is considerable interest in the Arctic as melting ice opens up the prospect of seabed minerals, and new sea-lanes.
Ambassador Ellertsdottir:  Yes. There is the Arctic Council, and Iceland is in the chair for the next two years. We took over from Finland. This involves running the agenda, the meetings, and so on. We feel the Arctic Council is very positive, actually the only forum where you have all the players in the area sitting at one table. It’s not supposed to discuss security, but there are now some situations which involve security. At the Arctic Council in October our Prime Minister Katrin Jakobsdottir raised the issue that maybe we should put security on the agenda, but it’s very highly debated where we should take up our concerns about security. Our view is that we should try to stay away from any tensions in the area and not be militarized, and we should have a peaceful, transparent, open dialogue on the issues in the Arctic.

Diplomatic Connections:  Except, of course, that the Russians are very busy in the area these days, and so are the Chinese, who somehow regard China as an Arctic country.
Ambassador Ellertsdottir:  I think we’re all Arctic countries when it comes to the impact the melting of the ice in the Arctic will have. That would be global.

Diplomatic Connections:  You were the negotiator of your government’s bi-lateral agreement with China. So how active are the Chinese in Iceland?
Ambassador Ellertsdottir:  Actually, they are not active at all. They have a big embassy, they have a station in the north researching the Northern Lights, but it’s not operational yet. They have no substantial investment in Iceland. When I was negotiating the trade agreement, Icelanders and others were concerned that it would open the door for Chinese investment in infrastructure, bringing their own people to work in Iceland. But the agreement does not open any doors for investment – it was purely a trade agreement. There is a misconception, I feel, in Washington that the Chinese are very active in Iceland, but that’s just not accurate. But, of course, they are there, and they’re looking at the prospect of new sea routes that might open up.

Diplomatic Connections:  Recently, a group of environmentalists placed a bronze plaque on the site where the first Icelandic glacier melted as a result of climate change. How big a problem is climate change for Iceland?
Ambassador Ellertsdottir:  It’s a huge problem. This glacier, called Ok, was symbolic. Scientists now say that at this rate of melting all the glaciers will have disappeared within 100 years, maximum 200 years. For us, glaciers are part of our identity. We have always thought of the glaciers as the permanent giants in our landscape. If they all disappear it will totally change the landscape. And you can see it if you travel the south of Iceland, where there are glacier lagoons – where the glaciers are receding and leaving water behind. These are getting bigger, and more numerous. I can see a difference from when I was young, and now.

Diplomatic Connections:  Is the disappearing icebergs your major environmental concern?
Ambassador Ellertsdottir:  Everything is of major concern when it comes to the environment, but our biggest concern is the ocean. We live from the ocean; fisheries are still one of the three most important industries in Iceland. We are a fish exporting nation. With the warming of the oceans the fish stocks might leave because they’ll go farther north into colder water. This is an economic and future concern for us: what effect will all this have on our livelihood? Plus the pollution, something on which the government has put a very high importance.

Diplomatic Connections:  How much of your energy supply comes from renewable sources?
Ambassador Ellertsdottir:  We are blessed that we have all our heating and electricity comes from renewable sources. It’s hydroelectric and geothermal, and we aim to be carbon neutral by 2040. There will be no new registration of fossil fuel-powered cars as of January 1st, 2030. We work very closely with the European Union on these issues; we’re kind of in a European bubble when it comes to the practical aims of keeping down global warming.

Diplomatic Connections:  Okay, European Union. Iceland is not an EU member, but you have a complicated history with the EU. Iceland applied for membership in 2009 in the immediate aftermath of your financial collapse, but then withdrew in 2015. If a referendum on EU membership were to be held tomorrow, what do you think would be the result?
Ambassador Ellertsdottir: I think it would be negative. People in Iceland are actually not very interested in joining the European Union, at the moment. I haven’t seen any recent polls on this, but, for example, in the 2018 election campaign this hardly came up as an issue. At the time that we applied for membership it was in the aftermath of the (financial) crisis, and people were very worried about our currency, the krona. But it was only the Social Democrats who were actually pushing for membership. They came into government with the left Greens, who didn’t support membership, but it was in the agreement between the two parties, so they agreed to go ahead with the application. However, they were reluctant players so it was difficult from the start. The other parties were rather skeptical, so it was already in the beginning difficult politically. We stopped the negotiations: we had already slowed them down very much and they were sort of on the back burner. Then in 2015, we notified the EU that we were not negotiating any longer, and that we didn’t want to be identified as an applicant.

Diplomatic Connections:  Why do you think the population does not support the idea of EU membership? Is it that they are guarding their fishing trade?
Ambassador Ellertsdottir:  That is one aspect of it. We know that if we joined the European Union the fisheries issue would be very complicated. We have worked very hard to achieve sustainable fisheries, responsible fisheries. But I think the lack of interest is due to the fact that we are doing very well economically. We have the lowest unemployment rate in the OECD. We rate highly on a lot of international scaling. So people don’t really see the added value of joining. We do have a comprehensive economic agreement with the European Union. For example, Icelanders can work in EU countries without any problem, our exporters have free access to the internal market. People are very practical: so if you would ask the question, what added value would there be to becoming a full member of the European Union, compared to belonging to the European Economic Area country? We have all these things from the European Union, but we don’t have a say in how they are developed.

Diplomatic Connections:  What do Icelanders think of Brexit?
Ambassador Ellertsdottir:  Actually, Brexit has been a big issue in Iceland because we have such close ties with the UK, which is our biggest trading partner of all the individual countries of the European Union. So it was quite worrisome for us that such an important partner of the EEA within the EU was going to leave. A lot of time and energy went into negotiating a new arrangement with the UK, along with our EEA partners Liechtenstein and Norway on keeping the rights that we have with the UK after Brexit.

Diplomatic Connections:  Do you now have a post-Brexit agreement with Britain?
Ambassador Ellertsdottir:  Yes, we have, which will kick in when the UK leaves the European Union.

Diplomatic Connections:  What are the details of this agreement – free movement of Icelandic goods and people?
Ambassador Ellertsdottir:  Yes. The foreign minister of Iceland has been quite vocal in saying that he fully understands the British desire to handle their own affairs. We are a small economy, so we need to be very open. We have free trade agreements all over the world. For the UK it will open new trade.

Diplomatic Connections:  You came here from the United Nations in New York, but you were only in that post for about a year.
Ambassador Ellertsdottir:  Now I say I made a stopover in New York. Iceland has a very small (foreign) service, and even if the rule of thumb is that you stay from three to five years, there can be some moments inside the service that make it necessary to ask someone to go somewhere else. It’s not the first time this has happened, and you of course don’t say no if you’re offered to go to Washington.

Diplomatic Connections: And having got here as a first timer, which is fairly unusual, what if your reaction to working in Washington?
Ambassador Ellertsdottir:  First of all Washington is very interesting and exciting. Yes, of course it is unusual that someone should be sent here who hadn’t served in Washington before, I was chosen because my background is in security and trade, and these are the two issues that are most important to us vis-à-vis the U.S. Washington is different from any other place because there are so many layers of influence and contacts that you need to make. In many countries you just deal with the government, mostly with the foreign ministry. Here you have this multilayered system with the Hill, the government, the think tanks, you even have the private sector, which is very important as well. It’s very challenging to try to establish all the contacts that would be useful, and also because we are a very small team here – thus we have to prioritize very carefully. We have close contacts with our Nordic friends on many issues.

Diplomatic Connections: What do you do for recreation?
Ambassador Ellertsdottir:  I try to do something with my two sons who are here with me, thirteen and sixteen, and I like to cook, that’s very relaxing for me.

Diplomatic Connections: On that note, Ambassador Ellertsdottir, we’ll conclude what has been a very engaging interview.  Thank you for taking time out of your busy schedule to speak with Diplomatic Connections.