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Cablegate: Independence Party Leader Seeks Meeting with White

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RR RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSL RUEHSR
DE RUEHRK #0203/01 3201643
ZNY CCCCC ZZH
R 161643Z NOV 09
FM AMEMBASSY REYKJAVIK
TO RUEHC/SECSTATE WASHDC 4217
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHNSC/NSC WASHDC

C O N F I D E N T I A L SECTION 01 OF 02 REYKJAVIK 000203

SIPDIS

TREASURY FOR MYERS AND NORTON
NSC FOR HOVENIER

E.O. 12958: DECL: 11/13/2019
TAGS: PGOV PREL EFIN IC
SUBJECT: INDEPENDENCE PARTY LEADER SEEKS MEETING WITH WHITE
HOUSE TO DISCUSS IMF

Classified By: CDA SAM WATSON FOR REASONS 1.4 (B) AND (D)

1.(C) Summary. Charge d'Affaires (CDA) met Bjarni
Benediktsson, leader of the opposition Independence Party, to
discuss a range of issues on November 11. Benediktsson was
eager to discuss a letter that he had sent recently to the
National Security Council (NSC) requesting a meeting with a
senior White House official. Were he to receive such a
meeting, Benediktsson said he would express outrage with how
the IMF was used as a tool against Iceland in the Icesave
dispute. He also would like to talk about future
opportunities for bilateral cooperation between Iceland and
the United States. End Summary.

Frustration with the IMF,s Role in Icesave
--------------------------------------------- -
2. (C) Charge d'Affaires met opposition Independence Party
Chairman Bjarni Benediktsson to discuss a range of issues on
November 11. Benediktsson said that one reason he hoped to
meet a high ranking official from the White House was to
express frustration with the role the IMF played in the
Icesave dispute. He opined that the Icesave matter was,
originally, an issue that involved only the
Governments of Iceland, Great Britain and the Netherlands.
The dispute among the three countries, he said, centered on
whether the Icelandic government must serve as guarantor for
British and Dutch depositors that lost money when the
Icelandic banking system collapsed. There was no EU
legislation, according to Benediktsson, that obligated
Iceland to act as such a guarantor and legal precedents on
the topic were murky at best. Great Britain and the
Netherlands, he said, understood that they were not operating
from positions of strength and brought the IMF into the
equation to force Iceland's hand. The threat of withholding
IMF loans until the Icesave dispute was resolved was used to
force the Government of Iceland to capitulate. It was, he
contended, a great misuse of the IMF and completely unfair to
Iceland.

3. (C) Benediktsson suggested that, at this point, the best
thing that could happen for the Icelandic people would be for
the measure to fail in a Parliamentary vote. The British and
Dutch would then, he said, be forced to sue the Government of
Iceland and seek compensation via the courts. A legal
solution would, he felt, be more preferable than the
negotiated settlement that is being thrust on the people of
Iceland. Benediktsson added that if the British and Dutch
did not feel comfortable pursuing the matter via Icelandic
courts, he would be happy to suggest that the issue be
resolved by a tribunal of independent judiciaries. He even
suggested that a U.S. Supreme Court Justice could play a role
as an arbitrator in the proceedings.

4. (C) Bendiktsson said that, in an attempt to force the
issue into the courts, he intends to oppose the
government-sponsored Icesave bill when it comes up for a vote
in Parliament. (Note: Benediktsson, along with most of his
opposition Independence Party colleagues, abstained when the
previous law was passed in August. End note). He
acknowledged, however, that the coalition government probably
had the votes necessary to pass the measure through
parliament. He also admitted that, were he to have his way
and the bill fail in parliament, it could further stall
Iceland's recovery efforts. It would certainly mean no
further loans from the IMF and, without that cash inflow, the
government would be unable to lift its capital control
restrictions and would likely have to issue Euro bonds to
raise the necessary capital. He also said he was not anxious
to assume leadership of the government, but preferred to
remain in opposition until after the May 2010 municipal
elections to benefit candidates from his party.

Increased Bilateral Cooperation with the U.S.
--------------------------------------------- --
5. (C) Benediktsson also hoped to discuss with the White
House ways to promote bilateral discussion and cooperation
between the United States and Iceland. He said that when the
U.S. withdrew from the Keflavik Air Base in 2006 it created a
public perception that the relationship between Iceland and
the United States was deteriorating. This perception, he
suggested, has only been enhanced with Iceland's recent
application to join the European Union. Benediktsson
acknowledged that the Strategic Dialogue allows for annual
high level meetings between U.S. and Icelandic government
officials. He felt, however, that even more dialogue was
necessary. Benediktsson was somewhat vague with suggestions
on how to accomplish this but suggested that the Parlimentary

REYKJAVIK 00000203 002 OF 002


Foreign Affairs Committee visit the United States. He then
asked whether, considering Iceland's current financial
problems, there might be some U.S. financing available to
facilitate such a trip. (Note: Benediktsson later sent CDA a
follow up email expressing continued interest in meeting with
an official from the White House even if he came alone. End
note.)

6. (C) Comment: Benediktsson continues to seek a meeting
with a high-ranking White House official to discuss
increased cooperation and the IMF vote even though IMF board
review vote is long past. His request may be a political
ploy designed to embarrass his opponents in the government
and make waves in the media. On the other hand, it could
also fit into the agenda of his Independence Party, an
organization which has traditionally supported strong ties
with the United States and fiercely opposes Iceland's
application to join the EU. Given his proposed solution on
Icesave, namely send it to the courts, his angle appears more
likely political than economic. End comment.
WATSON

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