Iceland between EU, Russia, Norway


The deep financial crisis at Iceland might make the country apply for EU membership. At the same time, the strategically located island continues negotiations with Russia over a major loan.


The Icelandic economic crisis could now result in a major shift in the country’s political adherence. According to newspaper Aftenposten, an Icelandic application to the EU is already prepared by the country’s foreign ministry.

At the same time, the country continues to fight for a loan from the IMF.

The exact size of the IMF loan remains unclear. However, the country’s Prime Minister Geir Haarde confirms to Reuters that the size is likely to end up around 5 billion USD. About 1.2 billion USD of that sum comes from Norway.

Meanwhile, Iceland continues to negotiate also with Russia over a credit. According to Russian Deputy Finance Minister Dmitry Pankin, the lending of 4 billion USD to Iceland would be too much for Russia now. The deputy minister ties a possible deal to the country’s handling of its debt obligations, the Moscow Times reports.

Sceptics have argued that a major Russian loan to Iceland could shift the power balance in the north Atlantic in favour of Russia. Iceland is a strategically important country in the region and both Norway, Russia and several other countries have major political and economical interests in the area.

During his recent visit to Iceland, the Norwegian Foreign Minister Jonas Gahr Støre highlighted that “Iceland is Norway’s friend, ally and neighbour across the sea”.

-We have similar geography. We share a common history and heritage. We share common resources. We must meet the major political and economic challenges together. We share a common future. This is why so many Norwegians are following Iceland’s situation so closely today. This is why the Norwegian Government is giving this clear message: when a brother is in need, we will stand up for him, he said in the speech available on the Norwegian Foreign Ministry’s website.

With his speech and subsequent 1.2 billion USD check, the Norwegian minister made himself a popular man in Iceland. It remains to see, however, whether the Norwegian support is accompanied by political demands. In any case, the crisis has forced Iceland to reorient its alliances – between Norway, the EU and Russia.