U.S. Department of State
Background Notes: Iceland, February 1997
Published by the Bureau of European and Canadian Affairs
Official Name: Republic of Iceland
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)
Climate: Maritime temperate.
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%.
Education: Compulsory education up to age 16. Attendance--99%.
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%.
Construction--10.7%. Transportation, communications--6.8%. Agriculture--
Type: Constitutional republic.
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
Flag: Red cross edged in white on a blue field.
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
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.
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.
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
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
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.
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
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.
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.
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
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)
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.
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
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
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
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
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
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. 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
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].
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