U.S. Department of State
Background Notes: Iceland, July 1996
Bureau of European and Canadian Affairs


Prepared and released by the Bureau of European and Canadian 
Affairs,
Office of Nordic and Baltic Affairs

July 1996
Official Name: Republic of Iceland

PROFILE

Geography

Area: 102,845 sq. km. (39, 709 sq. miles); about the size of Virginia or 
twice the size of Ireland.
Cities: Capital-- Reykjavik (pop. 157,957). Other towns--Kopavogur 
(16,186), Hafnarfjordur (15,151)
Akureyri (14,174).
Terrain: Rugged.
Climate: Maritime temperate.
Highest Elevation: Vatnajokull Glacier, at 2,119 meters (6,952 feet).

People

Nationality: Noun--Icelander(s). Adjective--Icelandic.
Population: 267,809. Annual growth rate: 1.08%.
Ethnic group: Homogenous mixture of descendants of Norwegians and 
Celts.
Religion: Evangelical Lutheran, 91%.
Language: Icelandic.
Education: Compulsory education up to age 16  Attendance--99%. 
Literacy--99.9%.
Health: Infant mortality rate--6/1,000. Life expectancy--men 75.8 yrs., 
women 80.8 yrs.
Work force: (131,038): Commerce--14.9%. Manufacturing--12.9%. 
Fishing/fish processing--11.8%. Construction--10.7%. Transportation, 
Communications--6.8%. Agriculture--5.1%. Unemployment: 4.3%

Government

Type: Constitutional republic. Independence: 1944.
Constitution: 1874.
Branches: Executive--president (chief of state), prime minister (head of 
government), Cabinet (9 ministers). Legislative--63 member 
unicameral parliament (called Althingi). Judicial--Supreme Court, 
district court, special courts.
Subdivisions: 23 Syslur (counties).
Major political parties: Independence (IP), Progressive (PP), People's 
Revival (PR), Social Democrats (SDP), People's Alliance (PA), 
Women's List (WL).
Suffrage: Universal over 18.
National holiday: June 17, anniversary of the establishment of the 
republic.
Flag: Red cross edged in white on a blue field.

Economy

GNP: $4.2 billion.
Annual growth rate: 3.2%.
Per capita GDP: $23,285.
Avg. inflation rate: %. Partners--EU 60% 
(U.K. 20%, Germany 13%), USA 15% ($235 million), Japan 14%. 
Merchandise Imports--$1.4 billion: Fuels and lubricants 8%, industrial 
supplies 27.4%, transport equipment 12.1%, food and beverages 
10.1%, other consumer goods 21.9%. Partners--EU 48.7% (Germany 
11%, U.K. 10%), USA 9% ($130.4 million).
Floating exchange rate: 66.36 kronur = $1.00.
Fiscal year: Calendar year.

Membership in International Organizations

North Atlantic Treaty Organization (NATO), Organization on Security 
and Cooperation in Europe (OSCE), Western European Union (WEU - 
Associate Member),  International Bank for Reconstruction and 
Development(IBRD - World Bank), International Development 
Association (IDA), International Finance Corporation(IFC), 
Organization for Economic Cooperation and Development (OECD), 
European Economic Area (EEA), European Free Trade Organization 
(EFTA), Council of Europe (COE), International Criminal Police 
Organization (INTERPOL), the United Nations (UN) and most of its 
specialized agencies, including the International), Food and 
Agricultural Organization (FAO),  International Atomic Energy 
Agency (IAEA),  International Civil Aviation Organization (ICAO), 
International Labor Organization (ILO), International Maritime 
Organization (IMO), International Telecommunications Union (ITU), 
UN Educational,  Scientific, and Cultural Organization (UNESCO), 
Universal Postal Union (UPO), World Health Organization (WHO), 
and World Meteorological Organization (WMO).

GEOGRAPHY

Iceland is a volcanic island in the North Atlantic Ocean east of 
Greenland and immediately south of the Arctic Circle. It lies about 
4,200 kilometers (2,600 mi.) from New York and 830 kilometers (520 
mi.) from Scotland.

About 79% of Iceland's land area, which is of recent volcanic origin, 
consists of glaciers, lakes, a mountainous lava desert (highest elevation 
2,000 meters--6,590 ft. --above sea level), and other wasteland. 20% of 
the land is used for grazing, and 1% is cultivated. The inhabited areas 
are on the coast, particularly in the southwest.

Because of the Gulf Stream's moderating influence, the climate is 
characterized by damp, cool summers and relatively mild but windy 
winters. In Reykjavik, the average temperature is 11 degrees C (52 
degrees F) in July and -1 degree C (30 degrees F) in January.

PEOPLE

Most Icelanders are descendants of Norwegian settlers and Celts from 
the British Isles, and the population is remarkably homogeneous. 
According to Icelandic Government statistics, 99% of the nations 
inhabitants live in urban areas (localities with populations greater then 
200) and 60% live in Reykjavik and the surrounding area. Of the 
Nordic languages, the Icelandic language is closest to the Old Norse 
language and has remained relatively unchanged since the 12th 
century.

About 91% of the population belong to the state church, the 
Evangelical Lutheran Church, or other Lutheran Churches. However, 
Iceland has complete religious liberty, and other Protestant and Roman 
Catholic congregations are present.

Most Icelandic surnames are based on patronymy, or the adoption of 
the father's first given name. For example, Magnus and Anna, children 
of a man named Petur, would hold the surname Petursson and 
Petursdottir, respectively. Magnus' children, in turn, would inherit the 
surname Magnusson, while Anna's children would claim their father's 
first given name as their surname. Women normally maintain their 
original surnames after marriage. This system of surnames is required 
by law, except for the descendants of those who had acquired family 
names before 1913. Most Icelanders, while reserved by nature, rarely 
call each other by their surnames, and even phone directories are based 
on first names. Because of its small size and relative homogeneity, 
Iceland holds all the characteristics of a very close-knit society.

Cultural Achievements

The Sagas, almost all written between 1180-1300 A.D., remain 
Iceland's best known literary accomplishment, and they have no 
surviving counterpart anywhere in the Nordic world. Based on 
Norwegian and Icelandic histories and genealogies, the Sagas present 
views of Nordic life and times up to 1100 A.D. The Saga writers 
sought to record their heroes' great achievements and to glorify the 
virtues of courage, pride, and honor, focusing in the later Sagas on 
early Icelandic settlers.

Unlike its literature, Iceland's fine arts did not flourish until the 19th 
century because the population was small and scattered. Iceland's most 
famous painters are Asgrimur Jonsson, Jon Stefansson, and Johannes 
Kjarval, all of whom worked during the first half of the 20th century. 
The best-known modern sculptor, Asmundur Sveinsson (1893-1982), 
drew his inspiration from Icelandic folklore and the Sagas for many of 
his works.

The best known Icelandic writer in this century is the Nobel Prize 
winner Mr. Halldor Laxness,  Literature and poetry remain a passion 
with the population. Literacy is 100%. Per capita publication of books 
and magazines is the highest in the world. In a population of 265,000 
people, there are five daily newspapers, 78 other newspapers and 629 
periodicals (1993 data).

The most famous Icelandic opera singer is Mr. Kristjan Johannsson, 
while the best known Icelandic artist in this century probably is the pop 
singer Bjork.

HISTORY

Iceland was settled in the late 9th and early 10th centuries, principally 
by people of Norse origin. In 930 A.D., the ruling chiefs established a 
republican constitution and an assembly called the Althingi--the oldest 
parliament in the world. Iceland remained independent until 1262, 
when Iceland entered into a treaty which established a union with the 
Norwegian monarchy. It passed to Denmark in the late 14th century 
when Norway and Denmark were united under the Danish crown.

In the early 19th century, national consciousness revived in Iceland. 
The Althingi had been abolished in 1800 but was reestablished in 1843 
as a consultative assembly. In 1874, Denmark granted Iceland home 
rule in 1874, which again was extended in 1904. The constitution, 
written in 1874, was revised in 1903, and a minister for Icelandic 
affairs, residing in Reykjavik, was made responsible to the Althingi. 
The Act of Union, a 1918 agreement with Denmark, recognized 
Iceland as a fully sovereign state united with Denmark under a 
common king. Iceland established its own flag and asked that Denmark 
represent its foreign affairs and defense interests.

German occupation of Denmark in 1940 severed communications 
between Iceland and Denmark. In May 1940, Iceland was occupied by 
British military forces. In July 1941, responsibility for Iceland's 
defense passed to the United States under a U.S. - Icelandic defense 
agreement. Following a plebiscite, Iceland formally became an 
independent republic on June 17, 1944.

In October 1946, the Icelandic and U.S. Governments agreed to 
terminate U.S. responsibility for the defense of Iceland, but the United 
States retained certain rights at Keflavik. Iceland became a charter 
member of the North Atlantic Treaty Organization (NATO) in 1949. 
After the outbreak of hostilities in Korea in 1950, and pursuant to the 
request of NATO military authorities, the United States and Iceland 
agreed that the United States should again be responsible for Iceland's 
defense. This agreement, signed on May 5, 1951, is the authority for 
U.S. military presence in Iceland. Iceland is the only NATO country 
with no military forces.

GOVERNMENT

The president, elected to a 4-year term, has limited powers. The prime 
minister and cabinet exercise most executive functions. The Althingi is 
composed of 63 members, elected every four years unless it is 
dissolved sooner. Suffrage for presidential and parliamentary elections 
is universal, and members of the Althingi are elected on the basis of 
proportional representation from eight constituencies.

The judiciary consists of the Supreme Court, district courts, and 
various special courts. The constitution protects the judiciary from 
infringement by the other two branches.

Principal Government Officials

President--Olafur Ragnar Grimsson
Prime Minister--David Oddsson (IP)

Cabinet Ministers

Foreign Affairs--Halldor Asgrimsson (PP)
Finance--Fridrik Sophusson (IP)
Commerce, Power, & Industry--Finnur Ingolfsson (PP)
Fisheries, Justice, Religious Affairs--Thorsteinn Palsson (IP)
Agriculture & Environment--Gudmundur Bjarnason (PP)
Transportation & Communications--Halldor Blondal (IP)
Education & Culture--Bjorn Bjarnason (IP)
Social Affairs--Pall Peturson (PP)
Health & Social Security--Ingibjorg Palmadottir (PP)

Ambassador to the U.S.--Einar Benediktsson
Ambassador to the U.N.--Gunnar Palsson

Iceland maintains an embassy in the United States at 1156 15th Street, 
N.W., Suite 1200, Washington, D.C. 20005 [tel. (202)265-6653], and a 
consulate general at 800 Third Ave, 36th floor, New York, N.Y. 10022 
[tel. (212)593-2700]. In addition, Iceland has twenty honorary 
consulates in major U.S. cities.

POLITICAL CONDITIONS

In nationwide town council elections in 1994, the Government 
coalition partners, the conservative Independence Party (IP) and the 
Social Democrat Party (SDP) lost support throughout the country, 
including the capital Reykjavik, which the IP had controlled for more 
than half a century. In losing 4 seats in the April 1995 parliamentary 
elections, the IP and SDP mustered a simple majority in the 63-seat 
Althingi, or parliament. However, Prime Minister (and IP leader) 
Oddsson chose the resurgent Progressive Party as a more conservative 
partner to form a stronger and more stable majority with 40 seats. 
Splintered by factionalism over the economy and Iceland's role in the 
European Union (EU), the SDP also suffered from being the only party 
to support Iceland's EU membership application. Nonetheless, 
Icelandic policy towards the U.S. has remained unchanged.

In the worst land disaster in living Icelandic memory, a large avalanche 
killed 20 people in the fishing village of Flateyri in Northwest Iceland 
in October 1995. This tragedy came just nine months after an 
avalanche killed 14 people in the nearby town of Sudavik. For a 
country that averages about 1,000 Americans for every Icelander, these 
events represented relatively major tragedies.

Most private sector workers still belong to trade unions that are 
members of an umbrella organization, and virtually all employers 
belong to a similar confederation. At intervals, the two groups 
negotiate a "general" wage agreement, which sets a minimum wage. 
However, in recent years public sector employees and breakaway 
private trade unions have negotiated substantially larger raises in 
proportion to the broadly-based private sector agreements. Coupled 
with parliament's attempt in 1995 to give large, tax free increases in 
salaries and benefits to itself and other high-ranking public sector 
officials, this situation had destabilized the entire system of labor 
agreements. Following the largest protest in Icelandic history, when a 
work stoppage shut down cities, schools and businesses nationwide 
between several hours to one day in September 1995, the Government 
has sought to reach a series of patchwork accommodations, most 
notably in December 1995 with Iceland's air traffic controllers.

After sixteen years (four terms) as the world's first and only elected 
woman president, the widely popular Vigdis Finnbogadottir decided 
not to run for re-election in 1996. Although support for the current 
conservative coalition government has continued to grow, more than 
86% of all voters turned out in the June 29 presidential elections to 
give former leftist party chairman Olafur Ragnar Grimsson a 41% 
plurality and relatively comfortable 12% margin of victory over the 
closest of three other candidates. Traditionally limited to six to twelve 
weeks, Iceland's campaign season was marked by several intensely 
personal attacks on Grimsson, a former finance minister who tried to 
erase memories of his controversial support of inflationary policies and 
opposition to the U.S. military presence at the NATO base in Keflavik. 
Grimsson has pledged to use his largely ceremonial office to promote 
Icelandic trade abroad and family values at home.


========================================
Membership in 63-seat parliament:

Parties in Government--

25--Independence Party (IP)
15--Progressive Party (PP)

Parties in opposition--

09--People's Alliance (PA)
07--Social Democratic Party (SDP)
04--People's Movement (PM)
03--Women's Alliance (WL)
========================================


ECONOMY

Marine products accounted for 54% of Iceland's total exports in 1994. 
Other important exports include aluminum, ferro-silicon, equipment 
and electronic machinery for fishing and fish processing, and woolen 
goods. Foreign trade plays an important role in the Icelandic economy. 
In 1994, exports and imports accounted for 36% and 31% of GDP, 
respectively. Most of Iceland's exports go to the EU countries, the 
United States, and Japan.

Iceland's relatively liberal trading policy has been strengthened by 
accession to the European Economic Area in 1993 and by the Uruguay 
Round agreement, which also brought significantly improved market 
access for Iceland's exports, particularly seafood products. However, 
the agricultural sector remains heavily subsidized and protected, with 
some tariffs ranging as high as 700%.

Iceland's economy is prone to inflation but remains rather broad-based 
and highly export-driven. During the 1970's the oil shocks hit Iceland 
hard. Inflation rose to 43% in 1974 and 59% in 1980, falling to 15% in 
1987 but rising to 30% in 1988. Since then, inflation has dramatically 
fallen, and the current Government is committed to tight fiscal 
measures. While low by world standards, the current unemployment 
rate near 5% remains unacceptably high to most Icelanders. Iceland's 
economy experienced moderate GDP growth in 1995 (2.6%). Inflation 
averaged merely 1.5% from 1993-94, and only 1.7% from 1994-95. 
With increasing economic activity predicted in 1996, inflation should 
not increase dramatically.

Iceland has few proven mineral resources, although deposits of 
diatomite (skeletal algae) are being developed. Abundant hydroelectric 
and geothermal power sources are gradually being harnessed, and in 
1991 80% of the population enjoyed geothermal heating. The Burfell 
hydroelectric project is the largest single station with capacity of 
240mw. The other major hydroelectric stations are at Hrauneyjarfoss 
(210mw) and Sigalda (150 mw). Iceland is exploring the feasibility of 
exporting hydroelectric energy via submarine cable to mainland 
Europe and also actively seeks to expand its power-intensive industries, 
including aluminum and ferro-silicon smelting plants. In late 1995, 
Alusuisse-Lonza of Switzerland decided to expand its aluminum 
smelter in Straumsvik in southwestern Iceland from a 100,000 ton 
annual capacity to 160 tons per year.

Iceland has no railroads. Organized road building began about 1900 
and has greatly expanded in the past decade. The current national road 
system connecting most of the population centers is largely in the 
coastal areas and consists of about 12,177 kilometers (7,565 mi.) of dirt 
and gravel roads and about 1,150 kilometers (714 mi.) of hard-surfaced 
roads. Regular air and sea service connects Reykjavik with the other 
main urban centers. In addition, airlines schedule flights from Iceland 
to Europe and North America. The national airlines, Icelandair, is one 
of the country's largest employers. Iceland became a full European Free 
Trade Association member in 1970 and entered into a free-trade 
agreement with the European Community in 1973. Under the 
agreement on a European Economic Area, effective January 1, 1994, 
there is basically free cross border movement of capital, labor, goods, 
and services between Iceland, Norway, and the EU countries.

FOREIGN RELATIONS

Iceland maintains diplomatic and commercial relations with practically 
all nations, but its ties with other Nordic states, with the U.S., and with 
the other NATO nations are particularly close. Icelanders remains 
especially proud of the role Iceland played in hosting the historic 1986 
Reagan - Gorbachev Summit in Reykjavik which set the stage for the 
end of the Cold War.

Iceland's principal international dispute involves disagreements with 
Norway and Russia over fishing rights in the Barents Sea, which the 
parties are attempting to resolve through negotiation. Certain 
environmentalists are concerned that Iceland left the International 
Whaling Commission (IWC) in June 1992 in protest of an IWC 
decision to refuse to lift the ban on whaling, after the IWC Scientific 
Committee had determined that the taking of certain species could 
safely be resumed. That year, Iceland established its own commission 
(which the U.S. does not recognize) along with Norway, Greenland and 
the Faroes for the conservation, management and study of marine 
mammals. Since then, however, Iceland has not resumed whaling but 
has asserted the right to do so.

U.S. - ICELANDIC RELATIONS

U.S. policy aims at maintaining close, cooperative relations with 
Iceland, both as a NATO ally and as a friend interested in the shared 
objectives of enhancing world peace, respect for human rights, arms 
control, and economic development. Moreover, the United States 
endeavors to strengthen bilateral economic and trade relations.

DEFENSE

When Iceland became a founding member of NATO in 1949, it did so 
on the explicit understanding that Iceland, which has never had a 
military, would not be expected to establish an indigenous force. 
Iceland's main contribution to the common defense effort has been the 
rent-free provision of the "agreed areas,"--sites for military facilities. 
By far the largest and most important of these is the NATO Naval Air 
Station at Keflavik. Although this base is manned primarily by U.S. 
forces, it also has a permanently stationed Dutch P-3 aircraft and crew, 
as well as officers from Canada, Denmark, Norway, and the United 
Kingdom. Units from these and other NATO countries also are 
deployed temporarily to Keflavik, and they stage practice operations, 
mainly antisubmarine warfare patrols. Iceland and the United States 
regard the ongoing 55-year U.S. military presence as a cornerstone to 
bilateral foreign/security policy. Bilateral negotiations regarding 
implementation of a new "Agreed Minute" governing force structure 
and deployment for the defense of Iceland currently are underway in 
Reykjavik.

In addition to providing the "agreed areas," the Government of Iceland 
contributes financially to NATO's international overhead costs and 
recently has taken a more active role in NATO deliberations and 
planning. Iceland hosted the NATO Foreign Minister' Meeting in 
Reykjavik in June 1987 and participates in biennial NATO exercises 
entitled "Northern Viking" in Iceland; the next exercises will be held in 
1997. Iceland also intends to host a Partnership for Peace multinational 
disaster relief exercise in 1997 entitled, "Cooperative Safeguard."


Principal U.S. Officials

Ambassador --Day O. Mount
Deputy Chief of Mission--Mark Tokola
Political Officer--Mike Hammer
Economic/Commercial Officer--David G. Wagner
Administrative Officer--David M. Robinson
Communications Officer--Nicholas J. Adams
Consular Officer--Martha A. Husted
Public Affairs Officer--Andrew F. Key

The U.S. Embassy in Iceland is located at Laufasvegur 21, Reykjavik 
[tel. (354)562-9100].

TRAVEL NOTES

Entry requirements: Visas are not required for American citizens 
traveling to Iceland for tourism purposes for up to three months. 
However, prohibitions against working there without a work permit are 
strictly enforced. Travelers entering Iceland must present a valid 
passport (unless they are exempted by international agreements. 
Citizens of 14 European countries are exempted from this 
requirement). Admission of pets is prohibited without a long quarantine 
period and is strictly enforced.

Travel: The flight time between Iceland and New York City/ 
Washington DC is about 5 1/2 hours, or about the same distance to 
Seattle. There are direct daily flights year round.

Climate and clothing: The climate in Iceland is similar to but cooler 
than that in the U.S. Northwest. Woolen or other warm clothing is 
worn all year.

Health: Iceland has no endemic health problems. The major cities have 
adequate medical facilities.

Telecommunications: Telephone and telegraph service is state owned 
and is available throughout all of Iceland. Iceland has a single time 
zone and is on Greenwich Mean Time year round. It is five hours 
ahead of Eastern Standard Time in winter and four hours ahead in 
summer.

Transportation: Iceland has no railroads or streetcars. Local taxi and 
bus services are safe and efficient, but taxi fares are higher than on the 
U.S. east coast. There has been a rapid expansion of the paved road 
system in Iceland in recent years. Most of the "Ringroad" circling the 
island has been paved. Many roads outside the immediate vicinity of 
Reykjavik are gravel roads, some of which can be of poor quality, 
especially in spring. Cars or four-wheel-drive vehicles may be rented, 
but are expensive. A number of airlines serve most of the larger towns 
throughout the country.

Tourist attractions: Iceland's main attraction is its scenery, particularly 
during late spring and summer. The rugged landscape includes geysers 
and hot springs in various parts of the country and numerous waterfalls 
streaming from the glaciers and volcanic fields. The major historic site, 
now a national park, is Thingvellir, where the world's first parliament 
convened. Outdoor activities, including camping, hiking, skiing, and 
horseback riding, are popular. Although Icelandic horses are smaller 
than others, they are held in high esteem because of their unique 
abilities in performing different types of trots and are exported 
worldwide. Golf courses are available throughout the country and 
international tournaments are held. River-rafting also is commercially 
available in a few places. Fly fishing for Atlantic salmon and various 
types of trout has been an important part of the tourism industry for 
decades, but licenses cost $3,000/person per day. Hunting is 
increasingly popular, mostly for geese, ptarmigan, reindeer, fox, and 
ducks.

Most shops are closed on Sundays, legal holidays, and after 6:00 pm on 
weekdays. Shops are open on Saturday, usually from 9:00 am to 12:00 
pm (supermarkets 9:00am - 4:00 pm), from September 1 until June 1; 
during the summer, most shops do not open on Saturdays.

FURTHER INFORMATION

These titles are provided as a general indication of the material 
published on this country. The Department of State does not endorse 
unofficial publications.

Davis, Morris. Iceland Extends Its Fisheries. Oslo: Universitetsforlaget, 
1963.
Einarsson, Thorleifur. Geology of Iceland: Rocks and Landscape. 
ISBN 9979-3-0689-0.
Gislason, Gylfi Th. The Problem of Being an Icelander--Past, Present, 
and Future. P.K. Karlsson, trans. Reykjavik: Almenna Bokafelagid, 
1973.
Griffiths, John C. Modern Iceland.  New York: Praeger, 1969.
Grondal, Benedikt. Iceland: From Neutrality to NATO Membership. 
Oslo: Universitetsforlaget, 1971.
Hroarson, Bjorn and Jonsson, Sigurdur Sveinn. Geysers and Hot 
Springs in Iceland. ISBN 9979-3-0387-5.
ICELAND, 1995. Handbook Published by the Central Bank of Iceland, 
Reykjavik, 1996.
Olafsson, Gudmundur P. Iceland the Enchanted. Reykjavik: 1995; 
ISBN 9979-3-0838-9.
Perrottet, Tony, ed. Insight Guides: Iceland. Boston: Houghton Mifflin 
Company, 1994.
Rosenblad, Esbjorn and Sigurdadottir-Rosenblad, Rakel. Iceland from 
Past to Present. ISBN 9979-3-0502-9.
Scherman, Katherine. Daughter of Fire, A Portrait of Iceland. Boston: 
Little, Brown & Co., 1976.
Sigurjonsson, Arni, editor. Books on Iceland - a catalogue 1994. 
Reykjavik: Bokabud Mals og Menningar, 1994.

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