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### Viewing cable 09REYKJAVIK161, ICELANDIC FOREIGN MINISTER'S MEETING WITH CHARGE

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
09REYKJAVIK161 | 2009-09-21 09:15 | 2011-01-13 05:37 | CONFIDENTIAL | Embassy Reykjavik

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    VZCZCXRO0274
    PP RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSL RUEHSR
    DE RUEHRK #0161/01 2640915
    ZNY CCCCC ZZH
    P 210915Z SEP 09
    FM AMEMBASSY REYKJAVIK
    TO RUEHC/SECSTATE WASHDC PRIORITY 4165
    INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
    RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
    RHEHNSC/NSC WASHDC PRIORITY
    RUCNDT/USMISSION USUN NEW YORK PRIORITY 0104

` `

    C O N F I D E N T I A L SECTION 01 OF 02 REYKJAVIK 000161

    SIPDIS

    STATE FOR EUR/NB
    NSC FOR HOVENIER
    IO/UNP FOR SUN
    EUR/PGI FOR ELDRIGE
    EUR/RPM FOR WILTON
    USUN FOR DUGAN
    TREASURY FOR MEYER

    E.O. 12958: DECL: 09/18/2019
    TAGS: PGOV PREL ECON UNGA NATO IC AF UK NL
    SUBJECT: ICELANDIC FOREIGN MINISTER'S MEETING WITH CHARGE
    FOCUSES ON UNGA, ICESAVE, NATO

    REF: 09 REYKJAVIK 146

    Classified By: CDA Sam Watson for reasons 1.4 (b) and (d).

    ¶1. (C) Summary.  Charge d'Affaires (CDA) discussed a range of
    issues with Icelandic Foreign Minister Ossur Skarphedinsson
    on September 16 during his first courtesy call.  The Minister
    described his plans for the UN General Assembly.  On Icesave,
    he said that the British and Dutch had responded positively
    to some conditions that the Icelandic Parliament had added,
    but had not accepted all of them.  He confided that he had
    concerns about what would happen if the agreement had to go
    back to the Icelandic Parliament.  He also underscored
    Iceland's commitment to NATO, pledged to continue to provide
    personnel to Afghanistan and described Iceland's EU accession
    process timetable.  End summary.

    UNGA
    -----
    ¶2. (C) On the eve of his trip to the United Nations General
    Assembly, Foreign Minister Ossur Skarphedinsson candidly
    assessed Iceland's foreign relations as well as its domestic
    political situation in an initial meeting with CDA on
    September 16. While looking forward to the Trans-Atlantic
    dinner, Skarphedinsson's main UNGA priority is discussions
    with European Union member states, in part to lobby for
    Iceland's EU candidacy.  In his address to the General
    Assembly, Skarphedinsson said he would touch upon a number of
    issues including the Middle East and the High North, but
    noted that he has a propensity to speak off the cuff and may
    change the focus of his speech.  Skarphedinsson also plans to
    discuss with the IMF its review of Iceland, which has been
    postponed pending resolution of the Icesave issue.

    Icesave
    -------
    ¶3. (C) The Foreign Minister provided a frank update on the
    status of the Icesave agreement (reftel).  He said that
    Iceland recently received an informal response from the
    British and Dutch governments regarding the amendments that
    the Icelandic Parliament attached to the original Icesave
    agreement.  Under normal circumstances, he would consider the
    British and Dutch response to be a positive one in that it
    clearly demonstrated intent on their part to work with
    Iceland.  He admitted, however, that the British and Dutch
    had not accepted all of Iceland's amendments and he was
    unsure what that meant for the future of the agreement.

    ¶4. (C) Skarphedinsson said that he was meeting with Prime
    Minister Johanna Sigurdardottir later that afternoon to
    discuss the British and Dutch response in greater detail.  He
    expressed concern, however, about what would happen if the
    Icesave agreement had to go back in front of the Icelandic
    Parliament.   Calling Iceland's current political situation
    "troubled," he said it is difficult to know how other
    political parties will react should the Icesave issue come up
    again in Parliament.  Skarphedinsson noted that, while his
    Social Democratic party is unified in supporting the Icesave
    agreement, their coalition partners in the Left Green
    alliance are deeply split over the issue.  He called the head
    of the Left Green alliance, Finance Minister Steingrimur
    Sigfusson, a capable leader, but said that "he doesn't have
    full control of his party."

    ¶5. (C) Iceland's future, according to Skarphedinsson, largely
    hinges on the Icesave agreement.  He mentioned that the fate
    of potential Nordic and IMF loans, as well as Iceland's EU
    accession, all hinge on a successful completion of the
    Icesave agreement.  Skarphedinsson intends to continue with
    his dual-pronged strategy of engaging the British and Dutch
    governments and also talking to key Icelandic political
    players.  Although discussions continue on both fronts,
    Skarphedinsson did not appear particularly optimistic about a
    positive outcome.  He noted that he and the Finance Minister
    continue to discuss the agreement with their counterparts in
    The Hague and London, keeping the Prime Minister informed.
    Commenting that he normally talks to the PM several times
    daily on this issue, he said that he and Sigurdardottir have
    a close relationship forged during their decade of working
    together.  As a result he and his ministry play the dominant
    role in foreign relations, while she leads on domestic

    REYKJAVIK 00000161  002 OF 002

    matters.

    Defense Matters
    ----------------
    ¶6. (C) Skarphedinsson also spoke about defense issues
    including the closure of the Icelandic Defense Agency (IDA).
    Acknowledging the government's focus on Icesave, he
    nevertheless expressed optimism that a decision on IDA's
    future would come by year end.  Some of the IDA's duties
    would likely transfer to the Coast Guard, which falls under
    the Ministry of Justice.  He hoped, however, that most
    defense matters would remain with the MFA.  He stressed that,
    no matter how the reorganization turns out, Iceland will
    continue to uphold its NATO obligations.  When speaking of
    NATO commitments, the minister specifically stated that
    Iceland intends to take part in the Northern Viking exercise
    in 2010.  (Comment.  This information contradicts rumors we
    heard earlier that Iceland was considering postponing next
    year's Northern Viking exercise as a cost-saving measure. End
    comment.)

    ¶7. (C) The Minister said that Iceland also remains committed
    to the effort in Afghanistan.  He said that, while he
    personally has concerns about the prospects for the war in
    Afghanistan, the Icelandic government understands its
    responsibility to contribute as a NATO member.  Iceland has
    no intention, he said, of completely withdrawing its
    personnel from Afghanistan and has never even discussed it as
    an option.

    ¶8. (C) Noting the occasional activity of Russian planes in
    Iceland's air space, Skarphedinsson said he could not
    overstate the importance of the High North.  The Russians, he
    claimed, have specifically stated that the High North is a
    top strategic priority.  Skarphedinsson then, bluntly, used
    the High North discussion as an opportunity to chastise the
    U.S. for closing down the Keflavik Airbase in Iceland.  The
    decision, he said, was "a bloody mistake."  He noted that he
    understood the reasoning behind the decision and the need to
    reduce costs, but believes that the U.S. should have
    maintained some sort of presence in Iceland to protect its
    interests in the High North.

    EU Accession Process
    ---------------------
    ¶9. (C) Regarding Iceland's bid to join the EU,
    Skarphedinnsson said that everything is progressing smoothly.
     Iceland should have answers for the EU accession
    questionnaire by the EU's November 16 deadline.
    Skarphedinsson believes that this deadline was intentionally
    set to ensure that Iceland's candidacy cannot be evaluated at
    December's European Council summit.  Delaying consideration
    until spring would avoid the perception that Iceland's
    membership is fast-tracked at the expense of other
    candidates.  The most likely scenario, he opined, is that
    Iceland's membership application would be discussed at the
    March summit of the European Council and that accession
    negotiations will begin soon afterwards.

    WATSON

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