U.S. Department of State
Background Notes: Iceland, June 1997

Released by the Bureau of European and Canadian Affairs, June 30, 1997.

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) Akureyri (14,174). 
Terrain: Rugged. 
Climate: Maritime temperate.
Highest elevation: Vatnajokull Glacier, at 2,119 meters (6,952 feet).


Nationality: Noun--Icelander(s). Adjective--Icelandic.
Population: 269,735. 
Annual growth rate: 1.02%. 
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--
Health: Infant mortality rate--6/1,000. Life expectancy-men 76.3 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%


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 
Flag: Red cross edged in white on a blue field.


GNP: $4.2 billion. 
Annual growth rate: 2.5%. 
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.
1994 Trade: 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%), 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.


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 11oC (52oF) in July 
and -1oC (30oF) in January.


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.


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 


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 UN--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.


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 16 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.

Parties in Government

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

Parties in opposition

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

Total: 63


Marine products accounted for 54% of Iceland's total exports in 1994. 
Other important exports include aluminium, 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 

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 

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.


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. 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.


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 Ministers' 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 

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 A. Solberg 
Communications Officer--Leonard M. Kreske 
Public Affairs Officer--Richard Lundberg

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


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 

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 

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