Republic of Iceland
Area: 103,000 sq. km. (39,600 sq. mi.);
about the size of Virginia or slightly larger
Cities: Capital--Reykjavik (pop. 114,800). Other
towns--Kopavogur (26,468), Hafnarfjordur
(22,451), Akureyri (16,736).
Climate: Maritime temperate.
Highest elevation: Hvannadalshnjukur at
Vatnajokull Glacier, at 2,111 meters (6,925
Population (December 2005): 299,891.
Annual growth rate: 2.2%.
Ethnic group: Relatively homogenous mixture of
descendants of Norwegians and Celts.
Religion: Evangelical Lutheran, 86%.
Education: Compulsory up to age 16.
Health: Infant mortality rate--2.2/1,000.
Life expectancy--men 78.2 years, women
Work force (2005, 165,900): Commerce--14.0%;
transportation and communications--6.8%;
Type: Semi-presidential, parliamentary.
Independence: 1918 (became "sovereign state"
under Danish Crown); 1944 (establishment of
Branches: Executive--president (head of
state), prime minister (head of government),
cabinet (12 ministers). Legislative--63-member
unicameral parliament (Althingi). Judicial--Supreme
Court, district courts, special courts.
Subdivisions: 26 administrative districts and
Major political parties: Independence (IP),
Progressive (PP), Social Democratic Alliance (SDA),
Left-Green Party (LGP), Liberal Party (LP).
Suffrage: Universal 18 years and above.
National holiday: June 17, anniversary of the
establishment of the republic.
GDP (2005): $15.8 billion.
GDP growth rate (2004): 6.2%; (2005): 5.5%.
Per capita GDP: $53,555 (2005).
Inflation rate (2006): 4.1%.
Budget (2006): $5.3 billion.
Annual budget surplus (2006): 2.0% of GDP.
Net public debt (2006): 7.1% of GDP.
Foreign aid as part of 2004 budget: 0.19% of
Natural resources: Marine products,
hydroelectric and geothermal power.
tomatoes, cucumbers, turnips, livestock.
Industry: Types--aluminum smelting,
fishing and fish processing technology, ferro-silicon
alloy production, hydro and geothermal power,
tourism, information technology.
Trade: Exports of goods (2004)--$2.82
billion: marine products 62%, industrial
products 34%, agriculture 2%, and miscellaneous
2%. Partners--EU 72% (U.K. 18%, Germany
17%, Netherlands 11%, Spain 6%, Denmark 5%);
U.S. 9% ($218 million); EFTA 6%; Japan 3%.
Imports (2004)--$3.39 billion: industrial
supplies 27%; capital goods, parts, accessories
23%; consumer goods 20%; transport equipment
14%; food and beverages 9%; fuels and lubricants
8%. Partners--EU 62% (Germany 13%,
Denmark 9%, U.K. 8%, Sweden 7%, Netherlands 7%);
U.S. 8% ($208 million); EFTA 9%; Japan 4%.
Iceland is a volcanic island in the North
Atlantic Ocean east of Greenland and immediately
south of the Arctic Circle. It lies about 4,200
kilometers (2,600 mi.) from New York and 830
kilometers (520 mi.) from Scotland.
About 79% of Iceland's land area, which is of
recent volcanic origin, consists of glaciers,
lakes, a mountainous lava desert (highest
elevation 2,000 meters--6,590 ft.--above sea
level), and other wasteland. About 28% of the
land is used for grazing, and 1% is cultivated.
The inhabited areas are on the coast,
particularly in the southwest where about 60% of
the population lives.
Because of the Gulf Stream's moderating
influence, the climate is characterized by damp,
cool summers and relatively mild but windy
winters. In Reykjavik, the average temperature
is 11°C (52°F) in July and -1°C (30°F) in
Most Icelanders are descendants of Norwegian
settlers and Celts from the British Isles, and
the population is remarkably homogeneous.
According to Icelandic Government statistics,
93% of the nation's inhabitants live in urban
areas (localities with populations greater than
200) and about 60% live in the Reykjavik
metropolitan area. Of the Nordic languages, the
Icelandic language is closest to the Old Norse
language and has remained relatively unchanged
since the 12th century.
About 91% of the population belongs to the
state church, the Evangelical Lutheran Church,
or other Lutheran Churches. However, Iceland has
complete religious liberty, and about 20 other
religious congregations are present.
Most Icelandic surnames are based on
patronymy, or the adoption of the father's first
given name. For example, Magnus and Anna,
children of a man named Petur, would hold the
surname Petursson and Petursdottir,
respectively. Magnus' children, in turn, would
inherit the surname Magnusson, while Anna's
children would claim their father's first given
name as their surname. Women normally maintain
their original surnames after marriage. This
system of surnames is required by law, except
for the descendants of those who had acquired
family names before 1913. Most Icelanders, while
reserved by nature, rarely call each other by
their surnames, and even phone directories are
based on first names. Because of its small size
and relative homogeneity, Iceland holds all the
characteristics of a very close-knit society.
The Sagas, almost all written between 1180-1300
A.D., remain Iceland's best-known literary
accomplishment, and they have no surviving
counterpart anywhere in the Nordic world. Based
on Norwegian and Icelandic histories and
genealogies, the Sagas present views of Nordic
life and times up to 1100 A.D. The Saga writers
sought to record their heroes' great
achievements and to glorify the virtues of
courage, pride, and honor, focusing in the later
Sagas on early Icelandic settlers. The
best-known Icelandic writer of the 20th century
is the 1955 Nobel Prize winner Halldor Kiljan
Laxness. The literacy rate is 99.9%, and
literature and poetry are a legendary passion
with the population. Per capita publication of
books and magazines is the highest in the world.
Unlike its literature, Iceland's fine arts
did not flourish until the 19th century because
the population was small and scattered.
Iceland's most famous painters are Asgrimur
Jonsson, Jon Stefansson, and Johannes Kjarval,
all of whom worked during the first half of the
20th century. The best-known modern sculptor,
Asmundur Sveinsson (1893-1982), drew his
inspiration from Icelandic folklore and the
Sagas for many of his works.
Kristjan Johannsson is most likely Iceland's
most famous opera singer, while pop singer Bjork
is probably its best-known artist
internationally together with the progressive
rock band Sigur Ros.
Iceland was settled in the late 9th and early
10th centuries, principally by people of Norse
origin. In 930 A.D., the ruling chiefs
established a republican constitution and an
assembly called the Althingi--the oldest
parliament in the world. Iceland remained
independent until 1262, when it entered into a
treaty establishing a union with the Norwegian
monarchy. Iceland passed to Denmark in the late
14th century when Norway and Denmark were united
under the Danish crown.
In the early 19th century, national
consciousness revived in Iceland. The Althingi
had been abolished in 1800 but was reestablished
in 1843 as a consultative assembly. In 1874,
Denmark granted Iceland home rule, which again
was extended in 1904. The constitution, written
in 1874, was revised in 1903, and a minister for
Icelandic affairs, residing in Reykjavik, was
made responsible to the Althingi. The Act of
Union, a 1918 agreement with Denmark, recognized
Iceland as a fully sovereign state united with
Denmark under a common king. Iceland established
its own flag, but Denmark continued to represent
Icelandic foreign affairs and defense interests.
German occupation of Denmark in 1940 severed
communications between Iceland and Denmark.
Consequently, Iceland moved immediately to
assume control over its own territorial waters
and foreign affairs. In May 1940, British
military forces occupied Iceland. In July 1941,
responsibility for Iceland's defense passed to
the United States. Following a plebiscite,
Iceland formally became an independent republic
on June 17, 1944.
In October 1946, the Icelandic and U.S.
Governments agreed to terminate U.S.
responsibility for the defense of Iceland, but
the United States retained certain rights at
Keflavik. Iceland became a charter member of the
North Atlantic Treaty Organization (NATO) in
1949. After the outbreak of hostilities in Korea
in 1950, and pursuant to the request of NATO
military authorities, the United States and
Iceland agreed that the United States should
again be responsible for Iceland's defense. A
bilateral defense agreement signed on May 5,
1951, is the authority for U.S. military
presence in Iceland. Iceland is the only NATO
country with no standing military of its own.
The president, elected to a 4-year term, has
limited powers. The prime minister and cabinet
exercise most executive functions. The
parliament is composed of 63 members, elected
every 4 years unless it is dissolved sooner.
Suffrage for presidential and parliamentary
elections is universal for those 18 and older,
and members of the parliament are elected on the
basis of parties' proportional representation in
six constituencies. The judiciary consists of
the Supreme Court, district courts, and various
special courts. The constitution protects the
judiciary from infringement by the other two
Principal Government Officials
President--Olafur Ragnar Grimsson
Prime Minister--Halldór Ásgrímsson
Foreign Minister--Geir H. Haarde
Minister of Finance--Árni M. Mathiesen
Minister of Justice--Björn Bjarnason
Minister of Agriculture--Guðni Ágústsson
Minister of Communications--Sturla Böðvarsson
Minister of Fisheries--Einar Kristinn Guðfinnson
Minister for the Environment and Nordic
Cooperation--Sigríður Anna Þórðardóttir
Minister of Industry and Commerce--Valgerður
Minister of Health and Social Security—Siv
Minister of Social Affairs—Jon Kristjansson
Minister of Education, Science and Culture--Þorgerður
Speaker of Althingi--Sólveig Pétursdóttir
Ambassador to the U.S.--Helgi Agustsson
Ambassador to the UN--Hjalmar W. Hannesson
Ambassador to NATO--Gunnar Gunnarsson
Ambassador to the EU-- Stefan Haukur Johannesson
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Iceland maintains an
in the United States at 1156 - 15th Street, NW,
Suite 1200, Washington, DC 20005 [tel. (202)
265-6653], and a consulate general at 800 Third
Ave, 36th floor, New York, NY 10022 [tel. (212)
593-2700]. Iceland also has 25 honorary
consulates in major U.S. cities.
The current government is a coalition of the
conservative Independence Party (IP) and the
moderate Progressive Party (PP). The two
parties, which have been in coalition since the
1995 election, hold a majority in parliament,
even though the IP lost some ground in the May
2003 election. Longtime IP leader David Oddsson
was Prime Minister 1991-2004, making him the
longest-serving prime minister in Europe (from
1991 to 1995, the IP was in coalition with the
Social Democratic Party). PP chairman and former
Foreign Minister Halldor Asgrimsson took over as
Prime Minister on September 15, 2004, as part of
a post-election deal with the Independence
Party, and Oddsson became Foreign Minister.
Oddsson retired from his ministerial position
September 27, 2005, with former Finance Minister
Geir Haarde becoming Foreign Minister. In
October 2005, Oddsson stepped down as IP
chairman, and Haarde was elected to the post at
a party national conference.
Three left-wing parties--the Social
Democratic Party, the People's Alliance and the
Women's List--formed an electoral coalition
prior to the 1999 parliamentary election in the
hope of mounting a credible challenge to the
long-dominant Independence Party. But the dream
of creating a united left coalition failed when
disaffected leftists formed a new splinter party
called the Left Green Movement, led by former
deputy People's Alliance leader Steingrimur
Sigfusson. With this defection, the left
coalition won a disappointing 27% of the vote
(17 seats) in the 1999 election, four percentage
points below what the three parties had won
running separately in 1995. Their 31% (20 seats)
showing in 2003 recaptured this ground but did
not suffice to topple the government. The Left
Greens, on the other hand, surprised everyone by
winning a respectable 9% of the vote (6 seats),
and clinging to that support in 2003. Another
new faction, the Liberal Party, won 3% of the
vote (2 seats) in 1999 based on its strong
opposition to the current fishing management
system, and managed to double that support to
just over 7% (4 seats) in 2003.
Despite the poor electoral showing in 1999,
the three left-wing parties decided to merge
formally in 2000, creating a new party, the
Social Democratic Alliance, led by Ingibjorg
Solrun Gisladottir. The party has found it
difficult to reconcile the widely varying
foreign policy views of its members, which range
from strong support for NATO membership and the
U.S. military presence to pacifism and a desire
When Iceland became a republic in 1944, the
post of president was created to fill the void
left by the Danish king. Although the president
is popularly elected and has limited veto powers
(he can force a public referendum on a proposed
law by refusing to sign it--a power that has
only once been exercised), the expectation is
that the president should play the same limited
role as a monarch in a traditional parliamentary
The current President is Olafur Ragnar
Grimsson, a former political science professor
who led the far-left People's Alliance in
1987-95 and served as Finance Minister in
1988-91. Although Grimsson won office with only
a 41% plurality in 1996, he was not challenged
for re-election in 2000. This follows a
well-established tradition of giving deference
to sitting presidents. He was re-elected again
on June 26, 2004. Once in office, a president
can generally count on serving as many terms as
he or she likes, assuming good behavior.
Reflecting the belief that the president is
"above politics," presidential candidates run
for election as individuals--since 1952,
political parties have played no role in
nominating or endorsing candidates. President
Grimsson has occasionally drawn criticism for
breaching the bounds of presidential etiquette
by being too outspoken on sensitive political
Marine products account for the majority of
Iceland's exports of goods. Other important
exports include aluminum, ferro-silicon alloys,
equipment and electronic machinery for fishing
and fish processing and pharmaceuticals.
Information technology and life sciences and
related services are important growth areas. The
vast majority of Iceland’s exports go to the
European Union (EU) and the European Free Trade
Association (EFTA) countries, followed by the
United States and Japan. The U.S. is by far the
largest foreign investor in Iceland, and the
country’s largest supplier of imported services
(e.g., financial and franchise services,
movies/TV programs/music, tourism). Iceland's
relatively liberal trading policy was
strengthened by accession to the European
Economic Area in 1994 and by the Uruguay Round
agreement, which also brought significantly
improved market access for Iceland's exports,
particularly seafood products. However, the
agricultural sector remains heavily subsidized
In recent decades, Iceland's economy has been
prone to inflation due to periods of rapid
growth and its dependence on just a few key
export sectors (i.e., fish, and increasingly
tourism), which can fluctuate significantly from
one year to the next. The 1970s oil shocks hit
Iceland hard. Inflation rose to 43% in 1974 and
59% in 1980, falling to 15% in 1987 but rising
to 30% in 1988. Since 1990, due to economic
reforms and deregulation, inflation has
dramatically fallen, averaging around 4% in the
1990s. Due to several years of strong economic
growth, Iceland experienced the most positive
economic period in its history during that
decade. However, as with many advanced
countries, Iceland’s economy experienced a mild
recession during 2002 due to global conditions.
That recession was short-lived, and healthy
growth of 3% was registered during 2003. In
2004, the economy boomed, growing 5.8%, and
inflation was close to the Central bank’s upper
limit (4%) at 3.95%, while unemployment
decreased to about 3.2%.
Iceland has few proven mineral resources.
Abundant hydroelectric and geothermal power
sources allow over 90% of the population to
enjoy electricity and heating from these natural
resources. The Burfell hydroelectric project is
the largest single station, with capacity of 270
megawatts (mw). The other major hydroelectric
stations are at Hrauneyjarfoss (210 mw), Sigalda
(150 mw) and Blanda (150 mw). Iceland is
exploring the feasibility of exporting
hydroelectric energy via submarine cable to
mainland Europe and also actively seeks to
expand its power-intensive industries,
particularly aluminum smelting plants.
Iceland-based Nordural Aluminum is a wholly
owned investment by Century Aluminum of
Monterey, California. The plant employs more
than 200 people and will more than double its
90,000 tons per year capacity before the end of
the decade. Construction of a hydroelectric
power plant in connection with Alcoa’s planned
322,000 ton per year aluminum smelter has
already begun. The smelter will begin production
in 2007 at which point over $2 billion will have
been invested in this, the largest economic
project in Icelandic history.
Iceland has no railroads. Organized road
building began about 1900 and has greatly
expanded in the past decade. The current
national road system connecting most of the
population centers is largely in the coastal
areas and consists of about 13,000 kilometers
(8,125 mi.) of roads with about 4,330 kilometers
(2,706 mi.) paved. Regular air and sea service
connects Reykjavik with the other main
population centers. The national airline,
Icelandair, flies from Iceland to Europe and
North America, and is one of the country's
largest employers. Iceland became a full member
of the European Free Trade Association (EFTA) in
1970 and entered into a free trade agreement
with the European Community in 1973. Under the
European Economic Area (EEA) agreement, which
took effect January 1, 1994, there is basically
free cross-border movement of capital, labor,
goods, and services between Iceland, Norway, and
the EU countries.
When Iceland became a founding member of NATO in
1949, it did so on the explicit understanding
that Iceland, which has never had a military,
would not be expected to establish an indigenous
force. Iceland's main contribution to the common
defense effort has been the rent-free provision
of the "agreed areas"--sites for military
facilities. By far the largest and most
important of these is the NATO Naval Air Station
at Keflavik. Although this base is manned
primarily by U.S. forces, units from other NATO
countries also are deployed temporarily to
Keflavik, and they stage training exercises. In
May 2001 the 50th anniversary of the bilateral
agreement was celebrated.
In addition to providing the "agreed areas,"
the Government of Iceland contributes
financially to NATO's international overhead
costs and recently has taken a more active role
in NATO deliberations, planning, and
peacekeeping. Iceland hosted the NATO Foreign
Ministers' Meeting in Reykjavik in June 1987 and
again in May 2002.
Iceland maintains diplomatic and commercial
relations with practically all nations, but its
ties with other Nordic states, with the U.S.,
and with the other NATO member states are
particularly close. Icelanders remain especially
proud of the role Iceland played in hosting the
historic 1986 summit in Reykjavik between
President Reagan and Soviet leader Gorbachev,
which set the stage for the end of the Cold War.
Iceland has greatly increased its
international profile since the early 1990s with
the end of the Cold War. Since the mid-1990s,
Iceland has opened eight missions overseas,
including an embassy in Beijing, giving Iceland
a diplomatic presence in all five permanent
member countries of the UN Security Council. Not
coincidentally, it has announced its candidacy
to serve on the UN Security Council in 2009-10.
In the past few years, Iceland has also
established missions to the Council of Europe in
Strasbourg and to the Organization for Security
and Cooperation (OSCE) in Vienna. In 1998, it
bolstered its delegation to NATO, assigning a
permanent representative to the military
committee for the first time ever.
Notwithstanding its status as an unarmed
nation, Iceland has been eager to do its part to
contribute to the maintenance of international
peace and security. One of the niches it is
trying to fill is in civilian peacekeeping and
crisis management. It took a significant step
forward in this area in 2001 by launching its
Icelandic Crisis Response Unit (ICRU). In
setting up the ICRU, the Ministry for Foreign
Affairs established a roster of over 100 experts
in various occupations (police officers, nurses,
doctors, lawyers, engineers, journalists, etc.)
who will be specially trained and prepared to
deploy to trouble spots abroad on short notice.
Peacekeeping has been a permanent item in the
Icelandic state budget since 1994, and Iceland
has been an active member of the UN Peacekeeping
Committee since 1997. With the formal
establishment of ICRU, the government decided to
increase the number of deployed peacekeepers to
50 by 2006. The key emerging niche capability of
the ICRU is airport administration following the
successful management of the airport in
Pristina, Kosovo, in 2003 and of the airport in
Kabul, Afghanistan, in 2004-05.
Icelanders have a strong emotional bond with
the Baltic states, and Iceland prides itself on
being the first country to have recognized these
countries’ claim for independence in 1991.
Membership in International Organizations
Iceland is a member of the following
organizations: Arctic Council, Barents
Euro-Arctic Council; Council of Baltic Sea
States; Council of Europe; European Economic
Area; European Free Trade Organization; EFTA
Court; EFTA Surveillance Authority; North
Atlantic Treaty Organization; Organization for
Security and Cooperation in Europe; Organization
for Economic Cooperation and Development;
International Criminal Police Organization;
International Council for the Exploration of the
Sea; International Hydrographic Organization;
International Maritime Satellite Organization;
International Union for the Publication of
Custom Tariffs; Nordic Council; North-East
Atlantic Fisheries Commission; North Atlantic
Salmon Conservation Organization; the
International Whaling Commission; and the North
Atlantic Marine Mammal Commission.
It also is a member of the United Nations and
most of its related organizations, specialized
agencies, and commissions, including the
International Monetary Fund, World Trade
Organization, World Tourism Organization, Food
and Agricultural Organization, International
Atomic Energy Agency, International Civil
Aviation Organization, International Fund for
Agricultural Development; Industrial Development
Organization; International Labor Organization,
International Maritime Organization,
International Telecommunications Union, UN
Educational, Scientific, and Cultural
Organization, Universal Postal Union, World
Health Organization, and World Meteorological
Organization; World Intellectual Property
Organization; International Bank for
Reconstruction and Development; International
Development Association; International Finance
Corporation Multilateral Investment Guarantee
Agency and International Center for Settlement
of Investment Disputes; UN Conference on
Disarmament; Economic Commission for Europe; UN
High Commissioner for Refugees; Office for the
High Commissioner for Human Rights; Commission
of Human Rights; UN Conference on Trade and
U.S. policy aims to maintain close, cooperative
relations with Iceland, both as a NATO ally and
as a friend interested in the shared objectives
of enhancing world peace; respect for human
rights; economic development; arms control; and
law enforcement cooperation, including the fight
against terrorism, narcotics, and human
trafficking. Moreover, the United States
endeavors to strengthen bilateral economic and
Principal U.S. Officials
Deputy Chief of Mission--Philip S. Kosnett
Political Officer--Lisa S. Kierans
Economic/Commercial Officer--David E. Jaberg
Management Officer--Robert W. Dreesen
Communications Officer--Ryan M. Boera
Public Affairs Officer--Sally Hodgson
Consular Officer--Ronald E. Hawkins, Jr.
Regional Security Officer--Peter A. DiNoia
U.S. Embassy in Iceland is located at
Laufasvegur 21, Reykjavik [tel. (354) 562-9100].
The Embassy's web site is