If Russia saves Iceland

Iceland is strategically situated in the North and is a key player both in Arctic fisheries, shipping and in the ongoing debates on Arctic shelf delineation.

Should Russia grant Iceland the four billion EUR loan, that could potentially result in not only a stronger Icelandic economical, but also political dependence, on Russia.

As reported yesterday, Icelandic authorities have addressed Moscow with a request for a 4 billion EUR loan. The Russian Finance Minister Aleksey Kudrin quickly responded that he is positive towards the request.

Iceland is on its knees as its previously powerful banks are on the verge of total collapse. As national authorities are about to take over the banks, the whole state is in danger of bankrupting. Loans are now a prerequisite for economic survival and the Icelandic government has approached its neighbours for help.

If Russia becomes the country which saves the Icelandic economy, Russia could also end up securing an extended level of power in the North Atlantic. Iceland has a big fishery fleet operating all over the region. The country is also seen as one of the main shipping hubs as the vanishing ice makes the Arctic available for shipping. Iceland is also about to start offshore drilling for hydrocarbons on its northern shelf.

In addition, also defence relations between the two countries could strengthen. Iceland does not have its own armed forces and is dependent on cooperation with its allies.

With its economic rescue package, Russia could potentially take the opportunity to strengthen its positions in the region and secure a higher level of Icelandic support in hot political issues in the Arctic.

That will not only have consequences for Icelandic-Russian relations, but for the whole geopolitical situation in the region.

BarentsObserver, editorial