U.S. Department of State
Background Notes: Iceland, February 1997
Published by the Bureau of European and Canadian Affairs


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.


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: 1%.
Budget: $1.9 billion. Annual deficit--$61.5 million. Foreign aid as part 
of budget--0.11%
Natural resources: Fish, hydroelectric and geothermal power, diatomite.
Agriculture: Products--potatoes, turnips, livestock.
Industry: Types--aluminum smelting, fish processing, ferro-silicon 
production, geothermal power.
Trade (1994): Merchandise exports--$1.6 billion (exports of goods and 
services $2.2 billion): marine 
products 75.3%, aluminum 9.6%, ferro-silicon 2.4%, other manufactured 
products 6.7%. Partners--EU 
60% (U.K. 20%, Germany 13%), U.S. 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%), 
U.S. 9% ($130.4 million).
Floating exchange rate: 66.36 kronur=U.S.$1.


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 nation's 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.

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.


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. 
Twenty percent 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 110PC (520F) in July and -
10C (300F) in January.


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 
it 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 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 four-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.

Parties in Government

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

Parties in Opposition

9--People's Alliance (PA)
7--Social Democratic Party (SDP)
4--People's Movement (PM)
3--Women's Alliance (WL) 


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 UN--Gunnar Palsson

Iceland maintains an embassy in the United States at 1156 15th Street, 
N.W., Suite 1200, Washington, DC 
20005 [tel. (202) 265-6653], and a consulate general at 800 Third Ave, 
36th floor, New York, NY 10022 
[tel. (212) 593-2700]. In addition, Iceland has 20 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 a half-century. In losing four 
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 
toward 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 16 years (four terms) as the world's first and only elected woman 
president, the widely popular 
Vigdis Finnbogadottir decided not to run for reelection 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 12 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 used his largely ceremonial office to promote Icelandic 
trade abroad and family values at 
home.


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 1970s 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 1994-96. Increasing 
economic activity is predicted for 1997.

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 a capacity of 240 mw. The other major hydroelectric 
stations are at Hrauneyjarfoss (210 
mw) 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 remain 
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 staffed 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's meeting in Reykjavik in June 
1987 and participates in 
biennial NATO exercises entitled "Northern Viking" in Iceland; the next 
exercises will be held in June 
1997. Iceland also intends to host a Partnership for Peace multinational 
disaster relief exercise in June 1997 
entitled, "Cooperative Safeguard."


Principal U.S. Officials

Ambassador--Day O. Mount
Deputy Chief of Mission--Mark Tokola
Political/Consular Officer--Mike Hammer
Economic/Commercial Officer--Bo Otto
Administrative Officer--Sarah Solberg
Public Affairs Officer--Richard Lundberg

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


Travel and Business Information

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A booklet entitled Health Information for International Travel (HHS 
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