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Cablegate: Icelandic Foreign Minister's Meeting with Charge

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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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