THE BLOG

Is Russia Iceland's New Best Friend?

Last week, in a highly controversial move, Iceland's parliament voted by a narrow margin to begin accession talks with the European Union. In the flurry of activity and debate surrounding the vote, one piece of news slipped virtually unnoticed past the general Icelandic populace: that of Russia having agreed to provide a USD 500 million loan to Iceland.

Talk of a Russian loan first surfaced last year, just as the house of cards that was Iceland's financial system began to topple. At the beginning of October the board of Iceland's Central Bank announced that the Russian loan was already in the bag -- an announcement that was denied by the Russians the very next day: a cringe-worthy moment that is still being cited as proof of the Icelandic Central Bank's total incompetence at the time.

When this happened a new cold war seemed to be brewing (oh, how trivial our concerns were back then!) and the speculation was that Russia's ulterior motive was to gain hold of Iceland as a strategic base. The US, of course, had used Iceland as a strategic base for decades, or until 2006 when they unilaterally withdrew their troops. At any rate, it seemed very strange to us who populate this North Atlantic island that suddenly Russia wanted to be our new best friend -- particularly as the US was perceived to have turned its back on Iceland a few months earlier by leaving it out of an important currency swap agreement (which, in hindsight, may have been perfectly reasonable in light of all the crap and corruption that has surfaced in Iceland over the last few months).

The statement made by Geir Haarde, then-Prime Minister, at a press conference shortly after the meltdown, was certainly ominous enough:

"In such circumstances, one has to look for new friends."

And yet, after the embarrassing premature-announcement blunder, talk of the Russian loan seemed to fade into the distance. Until last week, that is, when the aforementioned news item appeared on the website barentsobserver.com. Personally I found this paragraph rather interesting:

"Russia has only minor economic relations with Iceland. The North Atlantic state remains however a geo-strategically highly interesting partner for Russia. In addition, it is believed that Russian corporate interests have invested heavily in parts of the Icelandic economy."

Okay. So this part:

"The North Atlantic state remains however a geo-strategically highly interesting partner for Russia."

... Is a no-brainer. The Arctic ice is melting and a new shipping route is opening up that will allow for much more efficient transport for the Russians than before. This in itself could have dramatic implications for Iceland, what with huge tankers potentially passing through its waters and even stopping off up north for refueling and a spot of maintenance and boozing and whatever else it is that sailors do when they stop in ports.

This part, however, I found particularly intriguing:

In addition, it is believed that Russian corporate interests have invested heavily in parts of the Icelandic economy

Whoa. Russian corporate interests have invested heavily in parts of the Icelandic economy? Um ... what Russian corporate interests?? Personally I'm not aware of any Russian corporate interests in Iceland. It's not like we have a LADA spare parts factory on the West Fjords, or a caviar processing plant on the Snaefellsnes peninsula.
UNLESS ... they're referring to the persistent rumours of money-laundering services allegedly provided by Landsbanki bank back in the days when it was still owned by the two Bjorgolfurs. Could those be the corporate interests they're referring to? Because try as I might, I can't think of any others.

At any rate, the good people at barentsobserver.com seem to know a lot more than we do:

... Analysts have also speculated about a possible new role of Russia on the island.

And on that note, I'll leave you with the only Russian word I know (so far):

BARISHNIKOV!!*

(* Which I understand is a name meaning "to defect to the United States")