Foreign policy and defense
Iceland is a nation in Northern Europe. Its capital city is Reykjavik. Iceland has no military defense of its own. Instead, it is a member of NATO’s defense alliance, which is responsible for the country’s military protection. Until 2006, the US had a military base outside Reykjavík. Iceland is outside the EU and the question of a possible Icelandic membership in the Union has been conflicting.
Both the population and the political parties are split into the EU. Until the end of the first decade of the 2000s, the opponents were the most. However, during the deep financial crisis that erupted in 2008, Icelanders’ willingness to join the Union increased and in 2011 concrete negotiations with the EU began on membership. The process went smoothly at first, as Iceland was already very much aligned with the EU through the EEA Agreement (see Economic overview). But the distribution of fishing rights was a problem. In addition, the protracted conflict with the UK and the Netherlands for compensation in connection with the Internet bank Icesave’s bankruptcy in 2008 led Icelanders’ resistance to the EU to grow again (see Modern history).
- Countryaah: Overview of business holidays and various national observances in Iceland for years of 2020, 2021, 2022, 2023, 2024 and 2025.
When a bourgeois government took office in the spring of 2013, it chose to withdraw the EU application. Iceland, however, cooperates closely with other European countries in various ways.
In order to reduce the risk of isolation from the rest of Europe, Iceland is happy to emphasize Nordic cooperation. The old Nordic passport union exists, and Iceland was a founding member of the Nordic Council in 1952.
Iceland joined NATO in 1949. In a 1951 agreement, the United States pledged to defend Iceland with US forces in the event of war. Iceland then leased land to an American airbase at Keflavík, five miles outside Reykjavík.
After the end of the Cold War in the early 1990s, Keflavik’s strategic importance diminished and the United States reduced the number of soldiers and aircraft on the base. In 2006, the United States took home the remaining soldiers and the air base was evacuated, despite protests from the Icelandic government. The country was held without military defense, although the 1951 US agreement still formally still applies. In 2007, Iceland signed an agreement with Norway that, in collaboration with NATO, promised to take responsibility for the protection of Iceland. In 2016, the United States and Iceland entered into an agreement that American soldiers could be temporarily placed on the island. The reason behind the decision was deteriorating relations between the Western world and Russia.
Both the base in Keflavík and the NATO membership have often been hot issues in Icelandic politics (see Modern History). Already in the 1951 agreement it was stated that no weapons were allowed to be installed at the base without an Icelandic permit. Nuclear weapons must not be brought into the country in accordance with a decision by the All Things of 1985.
As a major power-dependent small state, Iceland took the lead in recognizing the regained independence of the Baltic countries in the early 1990s. Iceland is working for the Baltic countries to become members of the Nordic Council. In 2011, Iceland became the first Western country to recognize Palestine as an independent state.
Iceland has fought several “fishing wars” with the United Kingdom and Norway, which also claim fishing rights in the Atlantic. In the 1970s, three “cod wars” broke out between Britons and Icelanders. In 1976, the conflict went so far that the countries temporarily broke off diplomatic relations before a settlement could be reached. In 1994, the EEA agreement was concluded, which regulated, among other things, fishing in the North Atlantic. By the last of the 2010s, Iceland has been in conflict with Norway, the Faroe Islands and the EU on mackerel catch (see also Agriculture and Fisheries).
Read here about Iceland’s whaling and the conflicts with other countries around it.
Iceland has a coastguard force of about 180 men.
FACTS – DEFENSE
Army: male (2017)
The fleet: 180 men (2012)
Military expenditure’s share of GDP: 0.0 percent (2017)
Military spending’s share of the state budget: 0.0 percent (2017)
The Icesave law is tightened
The whole thing adopts a new Icesave law, which means that Iceland commits to pay out a total of 3.8 billion euros by 2024 in compensation to the British and Dutch governments, which have replaced their citizens who lost money in the Icesave crash.
New tours around Icesave
The UK and the Netherlands believe that the Icesave law does not go far enough, while the opposition in Iceland thinks it goes too far. The Minister of Health resigns in protest of the law. The government is forced to start revising the Icesave law. The conflict around the law causes Icelanders’ resistance to EU membership to increase.
The Icesave team is pushed through
The parliament adopts a bill from the government, the so-called Icesave law, which means that the state will pay the equivalent of over SEK 40 billion to British and Dutch bank customers, who lost their savings in the Icelandic Internet bank Icesave bankruptcy. Large demonstrations against the law are held outside everything. The protesters believe that Icesave’s owners should pay the compensation, not the taxpayers.
Iceland applies for EU membership
The parliament decides that Iceland should apply for EU membership. 33 members voted for the application, 28 voted against and two members cast their votes. Five members of the Left-The Greens vote no, including the Minister of Agriculture and Fisheries. The application for membership in the EU is immediately submitted to the Presidency of Sweden.
A new left government is formed
A government coalition is formed between the Alliance and the Left Green. Social Democrat Sigurðardóttir remains as prime minister.
Electoral victory for the Alliance and the Left – the Greens
Victory becomes historic when the left gains a majority in everything for the first time. The Social Democrats become the largest party with 30 percent of the vote and the left get 22 percent. The Independence Party makes a historically bad choice and loses a third of its voters. The party receives 24 percent of the vote. The Progress Party raises its voting share slightly to 15 percent. The newly formed Citizens’ Movement gets into everything with 7 percent of the vote.
Two party leader changes
Ingibjörg Sólrún Gísladóttir resigns as leader of the Alliance and is succeeded by Prime Minister Sigurðardóttir. The Independence Party also changes leader, when Geir Haarde hands over to Bjarni Benediktsson.
The Governor is forced to step down
After a prolonged power struggle with the new government, central bank governor Davið Oddsson is forced to leave his post. As former prime minister, he is accused of having a large part in the debt for the financial crisis, mainly because the then government eased the credit rules. A Norwegian governor is appointed as new central bank governor.
The left government temporarily takes over
The alliance forms a minority government with the Left-Green. Social Democrat Jóhanna Sigurðardóttir becomes prime minister.
The government resigns and announces new elections
Protests against the government are growing in strength. Violent attacks on government members occur and the police seize many protesters. Prime Minister Haarde gives way to the protests, announces new elections and submits the government’s resignation application.