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U.S. Department of State Background Note

Iceland

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Iceland

GEOGRAPHY

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 Reykjavík, the average temperature is 11°C (52°F) in July and -1°C (30°F) in January.

PEOPLE

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 Reykjavík 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 Pétur, would hold the surname Pétursson and Pétursdóttir, 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.

Cultural Achievements
The Sagas, almost all written between 1180 and 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 Halldór 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 Ásgrímur Jónsson, Jón Stefánsson, and Jóhannes Kjarval, all of whom worked during the first half of the 20th century. The best-known modern sculptor, Ásmundur Sveinsson (1893-1982), drew his inspiration from Icelandic folklore and the Sagas for many of his works. Today, Kristján Jóhannsson is Iceland's most famous opera singer, while pop singer Björk and progressive rock band Sigur Rós are well known internationally.

HISTORY

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 (Alþingi) 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 limited home rule, which was expanded in scope in 1904. The constitution, written in 1874, was revised in 1903, and a minister for Icelandic affairs, residing in Reykjavík, 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 Keflavík. 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 make arrangements for Iceland's defense. A bilateral defense agreement signed on May 5, 1951, remains in force, even though the U.S. military forces are no longer permanently stationed in Iceland. Iceland is the only NATO country with no standing military of its own.

GOVERNMENT

The president, elected to a 4-year term, has limited powers. 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 system.

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 branches.

Principal Government Officials
President--Ólafur Ragnar Grímsson
Prime Minister--Geir H. Haarde
Foreign Minister--Ingibjörg Sólrún Gísladóttir
Minister of Finance--Árni M. Mathiesen
Minister of Justice and Ecclesiastical Affairs--Björn Bjarnason
Minister of Agriculture and Fisheries--Einar Kristinn Guðfinnson
Minister of Communications--Kristján L. Möller
Minister of Industry and Nordic Cooperation--Össur Skarphéðinsson
Minister for the Environment--Þórunn Sveinbjarnardóttir
Minister of Commerce--Björgvin G. Sigurðsson
Minister of Health--Guðlaugur Þór Þórðarson
Minister of Social Affairs--Jóhanna Sigurðardóttir
Minister of Education, Science and Culture--Þorgerður Katrín Gunnarsdóttir
Speaker of Althingi--Sturla Böðvarsson
Ambassador to the U.S.--Albert Jónsson
Ambassador to the UN--Hjálmar W. Hannesson
Ambassador to NATO--Gunnar Gunnarsson
Ambassador to the EU-- Stefán Haukur Jóhannesson

transliteration key:
Þ is "th" ð is "d"

Iceland maintains an embassy 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.

POLITICAL CONDITIONS

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 and protected.

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 and aluminum production), 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 2005 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%. The economy suffered a setback in spring 2006 when credit rating agencies and other international financial firms released a number of reports raising questions about the state of the Icelandic economy and the activities and stability of Iceland's major banks. These reports were widely covered in the international financial press, causing a marked drop in the value of the Icelandic krona and of shares listed on the Icelandic stock exchange. Since then the situation has calmed down, but there is no question that certain imbalances have emerged in the Icelandic economy, including a high current account deficit, high inflation and high private sector debt levels. It remains an open question whether these imbalances render Iceland particularly vulnerable to an economic crisis. Foreign confidence in the Icelandic economy is important to maintain the country's skillful use of foreign capital. Icelandic businessmen have become well known for risk taking, decisiveness, and swiftness in their investments. Wealthy Icelanders have successfully invested overseas, especially in the retail and real estate markets in Denmark and U.K. and telecom, pharmaceutical, banking, and financial sectors in Eastern Europe. This recent success has for the first time created a "super-rich" elite in Icelandic society.

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 Kárahnjúkar hydroelectric project is the largest single station, with capacity of 690 megawatts (mw). The other major hydroelectric stations are at Búrfell (270 mw), 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 450 people and recently expanded to a production capacity of 220,000 tons per year. A new smelter owned by Alcoa, another U.S.-owned aluminum company, began operations in June 2007. The smelter will have a production capacity of 346,000 tons per year when fully operational. The Kárahnjúkar hydroelectric power plant, completed in early 2007, was built in connection with Alcoa's smelter. A total of over $2 billion has been invested in the power plant and smelter, 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 Reykjavík 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 in 1970 and entered into a free trade agreement with the European Community in 1973. Under the European Economic Area 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.

DEFENSE

The U.S. and Iceland signed a bilateral agreement in 1951 stipulating that the U.S. would make arrangements for Iceland's defense on behalf of NATO and providing for basing rights for U.S. forces in Iceland. In March 2006 the U.S. announced it would continue to provide for Iceland's defense but without permanently basing forces in the country; Naval Air Station Keflavik closed in September 2006 after 55 years. The Government of Iceland expressed disappointment, and even opposition politicians opposed to the U.S. military presence criticized the manner of the closing, but bilateral discussions ensued to explore new ways of ensuring the country's security, with an emphasis on a "visible defense." Negotiations concluded with a Technical Agreement on base closure issues (e.g., facilities return, environmental cleanup, residual value) signed on September 29, 2006, and a "Joint Understanding" on future bilateral security cooperation (focusing on defending Iceland and the North Atlantic region against emerging threats such as terrorism and trafficking) signed by the Secretary of State, Prime Minister Haarde and Foreign Minister Sverrisdóttir in Washington on October 11, 2006. The U.S. also cooperated with local officials to mitigate the impact of job losses at the Air Station, notably by encouraging U.S. investment in industry and tourism development in the Keflavík area. The Government of Iceland announced in spring 2007 that a large portion of the former base site would be converted into the university-level "Atlantic Center of Excellence" with operations scheduled to begin in fall 2007.

Cooperative activities in the context of the new agreements began almost immediately, with the arrival of the amphibious ship USS Wasp in Reykjavík on October 12, 2006 (the first U.S. Navy port visit since 2002) to demonstrate the Navy's rapid reaction capability and to support counterterrorism training by units of Iceland's Coast Guard and police. In November 2006 a U.S. Navy P-3 patrol aircraft arrived at Keflavík for joint search and rescue, disaster surveillance, and maritime interdiction training. Further joint endeavors, including a U.S.-led air defense exercise, are slated for the summer of 2007.

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 Reykjavík in June 1987 and again in May 2002. Iceland hosted the NATO Military Committee in April 2007 and will host the NATO Parliamentary Assembly in October 2007.

FOREIGN RELATIONS

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 Development.

U.S.-ICELANDIC RELATIONS

Ambassador-- Carol van Voorst
Deputy Chief of Mission--Neil Klopfenstein
Political Officer--Brad Evans
Economic/Commercial Officer--Fiona Evans
Management Officer--Richard Johnson
Information Management Officer (acting)--Steve Ackerman
Public Affairs Officer--Sally Hodgson
Consular Officer--Allen Kepchar
Regional Security Officer--Peter A. Dinoia

The U.S. Embassy in Iceland is located at Laufasvegur 21, Reykjavík [tel. (354) 562-9100]. The Embassy's web site is http://reykjavik.usembassy.gov/

TRAVEL AND BUSINESS INFORMATION
The U.S. Department of State's Consular Information Program advises Americans traveling and residing abroad through Consular Information Sheets, Public Announcements, and Travel Warnings. Consular Information Sheets exist for all countries and include information on entry and exit requirements, currency regulations, health conditions, safety and security, crime, political disturbances, and the addresses of the U.S. embassies and consulates abroad. Public Announcements are issued to disseminate information quickly about terrorist threats and other relatively short-term conditions overseas that pose significant risks to the security of American travelers. Travel Warnings are issued when the State Department recommends that Americans avoid travel to a certain country because the situation is dangerous or unstable.

For the latest security information, Americans living and traveling abroad should regularly monitor the Department's Bureau of Consular Affairs Internet web site at http://www.travel.state.gov, where the current Worldwide Caution, Public Announcements, and Travel Warnings can be found. Consular Affairs Publications, which contain information on obtaining passports and planning a safe trip abroad, are also available at http://www.travel.state.gov. For additional information on international travel, see http://www.usa.gov/Citizen/Topics/Travel/International.shtml.

The Department of State encourages all U.S citizens traveling or residing abroad to register via the State Department's travel registration website or at the nearest U.S. embassy or consulate abroad. Registration will make your presence and whereabouts known in case it is necessary to contact you in an emergency and will enable you to receive up-to-date information on security conditions.

Emergency information concerning Americans traveling abroad may be obtained by calling 1-888-407-4747 toll free in the U.S. and Canada or the regular toll line 1-202-501-4444 for callers outside the U.S. and Canada.

The National Passport Information Center (NPIC) is the U.S. Department of State's single, centralized public contact center for U.S. passport information. Telephone: 1-877-4USA-PPT (1-877-487-2778). Customer service representatives and operators for TDD/TTY are available Monday-Friday, 7:00 a.m. to 12:00 midnight, Eastern Time, excluding federal holidays.

Travelers can check the latest health information with the U.S. Centers for Disease Control and Prevention in Atlanta, Georgia. A hotline at 877-FYI-TRIP (877-394-8747) and a web site at http://www.cdc.gov/travel/index.htm give the most recent health advisories, immunization recommendations or requirements, and advice on food and drinking water safety for regions and countries. A booklet entitled "Health Information for International Travel" (HHS publication number CDC-95-8280) is available from the U.S. Government Printing Office, Washington, DC 20402, tel. (202) 512-1800.

Further Electronic Information
Department of State Web Site. Available on the Internet at http://www.state.gov, the Department of State web site provides timely, global access to official U.S. foreign policy information, including Background Notes and daily press briefings along with the directory of key officers of Foreign Service posts and more. The Overseas Security Advisory Council (OSAC) provides security information and regional news that impact U.S. companies working abroad through its website http://www.osac.gov

Export.gov provides a portal to all export-related assistance and market information offered by the federal government and provides trade leads, free export counseling, help with the export process, and more.

STAT-USA/Internet, a service of the U.S. Department of Commerce, provides authoritative economic, business, and international trade information from the Federal government. The site includes current and historical trade-related releases, international market research, trade opportunities, and country analysis and provides access to the National Trade Data Bank.

Revised: Jul. 2007

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