Iceland Will Not Join the European Union


© Shutterstock

February 04, 2015 16:49 EDT

In this edition of the Interview, Fair Observer talks to former Icelandic Foreign Minister Jon Baldvin Hannibalsson.

We usually don’t find it making the headlines, but Iceland is a nation that has struggled with the question of whether to join the European Union (EU) or not. It has historically played a significant role in regional developments and made important contributions to security and democracy in Europe.

Along with Haiti, Mauritius, Monaco, Panama and Vanuatu, Iceland is one of few countries that have no standing army but a limited military. It has been Iceland’s policy to not maintain an army since 1869, however, it is an active and founding member of NATO and joined the Atlantic coalition in 1949.

Iceland is an official candidate to join the EU, even though its former foreign minister, Jon Baldvin Hannibalsson, believes the Nordic country will not unite with the European alliance in the foreseeable future.

Hannibalsson is a prominent Icelandic politician and diplomat who was foreign minister from 1988-95. He made Iceland the first world nation to recognize the three Baltic states of Estonia, Latvia and Lithuania in 1991. His most recent appointments include the Icelandic ambassador to the United States, Mexico, Finland and the three Baltic states.

In this exclusive Fair Observer interview, Hannibalsson talks about various issues, including Iceland’s legacy for the three Baltic countries, its relations with the European Union and the present-day Middle East.

Kourosh Ziabari: Iceland was the first nation to recognize the independence of Baltic states — Lithuania, Latvia and Estonia. This is what has made you a popular political figure among the peoples of these countries. What’s your view regarding the future of democracy in these countries and the fact that they are an integral part of the European Union? Why did you immediately recognize their independence following their secession from the Soviet Union?

Jon Baldvin Hannibalsson: Why did I take it upon myself to promote the cause of the Baltic nations’ restored independence in the early 90s? Because the leaders of the West at the time were not following up on their rhetoric on democracy and national self-determination. Why not? Because they had, unwisely, placed all their bets for ending the Cold War on the political fate of President [Mikhail] Gorbachev. Nothing should be said or done which undermined his position. If he were to be deposed, the hard-liners would come back. And there was a lot at stake. We might return to the Cold War. That would mean the end of the peace process. Negotiations on both conventional and nuclear disarmament would be off the agenda. The peaceful reunification of Germany would no longer be possible. And the liberation of central and eastern Europe might be put down by force.

All of this, they said, was dependent upon Gorbachev remaining in power. When Gorbachev’s proposed domestic reform turned out to be a failure, his only remaining mission was to keep the Soviet Union together under a new constitution — at all cost. So, the leaders of the West ended up supporting Gorbachev’s policy of keeping the Soviet Union together, and the Yugoslav Federation as well, in the name of stability. That’s why President Bush [Sr.] made his notorious “chicken speech” in Kiev in February 1990, appealing to the Ukrainians “not to succumb to extreme nationalism,” but to remain loyal to the Soviet Union in the name of peace and stability. This speech by an American president would be music to the ears of [Vladimir] Putin, who has long mourned the demise of the Soviet Union as “the greatest geo-strategic disaster of the 20th century.”

© Shutterstock

© Shutterstock

This was why [German] Chancellor [Helmut] Kohl and [French] President [Francois] Mitterrand jointly wrote a letter to [Lithuanian] President [Vytautas] Landsbergis, appealing to him to postpone the implementation of Lithuania’s declaration of independence and instead negotiate with the Soviets without preconditions. This is why US high officials gave the same message to the Baltic freedom fighters in Vilnius, Riga and Tallinn. And this is why, since the voices of the leaders of the Baltic independence movements were not listened to, that I tried to lend my voice to theirs in Western councils — especially NATO. This is why I responded, alone among NATO foreign ministers, to Baltic leaders’ appeal to come and stay with them in January 1991, when the Soviets had decided to use force to crack down on their independence movements and to bring about regime change.

This is why, when the hard-liners’ attempted coup d’état in Moscow August 1991 had failed, I decided to use that window of opportunity — the power vacuum and confusion in Moscow at that time — to invite the foreign ministers of all three Baltic states to Reykjavik to formalize the recognition of their restored independence. By doing so, I hoped to start a process that would become irreversible. That turned out to be right. To my mind, this is an example of “the solidarity of small nations” which, under the correct circumstances, can succeed when the leaders of major powers fail.

You ask about the future of democracy in those countries, which have become an “inseparable and integral part of the European Union” — and, you might have added, NATO. Well, compare their position with that of Ukraine’s: The Lithuanians, Latvians and Estonians have used the time since independence to consolidate their democratic institutions and to secure their independence in multinational organizations, such as the EU and NATO. The Ukrainian political elite failed utterly to do anything of the sort. Despite high expectations of the “Orange Revolution,” the leaders of Ukraine failed miserably in implementing any meaningful political and economic reform. Their society — including the defense establishment — is worm-eaten to the core by uncontrollable corruption. That’s why the Ukrainian leadership is now at the mercy of the Kremlin.

Ziabari: Slovenia was one of the countries that fought for independence for many years, and you had persistently advocated for its independence from Yugoslavia. Slovenians maintain that the superpowers, including EU member states at the time, had not supported their cause, and that is why Slovenia’s quest for international recognition was difficult. The Slovenians were forced into fighting a ten-day war to solidify their position as a new republic in Europe. However, Slovenia is now a thriving economy of the EU and a successful democracy. What’s your view on the road taken by Slovenians through these 23 years?

National Parliament in Reykjavik © Shutterstock

National Parliament in Reykjavik, Iceland © Shutterstock

Hannibalsson: You quote Slovenian sources who maintain “that the superpowers, including the EU member-states at the time, had not supported their cause.” That was indeed the case. When the Yugoslav federation was in the process of dissolution, the EU leadership adopted a policy of “wait and see.” The long-serving German foreign minister at the time, Herr Genscher, had a different take on the situation but couldn’t get his colleagues in the EU to take action. Just as in the case of the dissolution of the Soviet Union, I was firmly convinced that the break-up of the Yugoslavian federation was inevitable. It could only be held together by force, which indeed was what the Serbs used their army for. If we wanted to prevent civil war with all the inherent atrocities, the international community had to intervene in time to negotiate a peaceful and orderly emergence of the constituent parts of former Yugoslavia as independent states. The sooner this could be done, the better. To “wait and see” was to invite disaster.

Since Iceland was a member-state of EFTA [European Free Trade Association], I had close contacts with the Austrian authorities who, for historical reasons, were well informed about the situation on the ground in the region of the former Habsburgh Empire. The Austrians knew about my Baltic initiatives. They informed me about Genscher’s position. I received the message that, if I could take the initiative outside the EU, it would help Genscher turn around the big ship of the EU. This explains why Iceland became the first country to recognize the de facto independence of Slovenia.

In the case of Croatia, the situation was a bit more complicated. Iceland, after all, has its own national interests to take care of. Within NATO, at the time, there were ongoing major negotiations with the Soviet Union on disarmament in both conventional and nuclear weapons. We were worried that the Soviets would be tempted to depose of their nuclear waste, especially from their submarines, into the high seas. Such action on their behalf could easily have destroyed our economy, which was based on the utilization of marine resources. At a NATO ministerial meeting in London in 1990, I held up any agreement on the final text — which also involved German reunification — until I had, behind the scenes, secured German support for our precautionary clauses on naval disarmament. In addition, I agreed that Iceland would take the initiative in recognizing the independence of Croatia, thus helping Germany to put pressure on their EU colleagues to give up the impotent “wait and see” position, while the civil war in former Yugoslavia was gaining momentum.

By hindsight, few would deny now that the EU “wait and see” policy was an invitation for disaster. Had they acted earlier and with greater resolution, many tragedies of the Balkan Civil War could have been averted. The record of Slovenia since independence more than 23 years ago has proven our case.

© Shutterstock

© Shutterstock

Ziabari: The European Union has undergone several enlargement phases since its inception, and Iceland is an official candidate for EU membership. Do you believe that the next enlargement plan will include Iceland’s accession to the 28-member bloc? Has the government got a strategy for joining the EU, and does it meet the necessary?

Hannibalsson: Do I believe that the next enlargement plan will include Iceland’s accession to the 28-member bloc? No, I don’t. Does the government have any strategy for joining the EU? No, it doesn’t. Does Iceland meet the criteria necessary to be qualified for EU membership? No, it doesn’t.

In Iceland, contrary to what is the case in most countries, it is not only the extreme left, but also the right and the right of center who are against EU membership. Why? The two major center-right parties — [namely] the Independence Party and the Progressive Party — are traditionally beholden to the most powerful special interest groups in the country: the ship-owners’ lobby and the farmers’ association. The ship-owners have been given monopoly rights to utilize the fish stocks within the Icelandic exclusive economic zone. Those monopoly rights have been handed out for free, despite the law declaring the fish stocks to be the common property of the nation.

The ship-owners’ lobby fights tooth and nail against the proposal, that the fishing rights be auctioned to the highest bidder. They regularly put a lot of money into scare campaigns maintaining that, if inside the EU, foreign capital would buy up all the fishing rights. This sort of propaganda is effective in the fishing villages along the coast. Icelandic farmers, along with their Japanese and Norwegian colleagues, are heavily subsidized. Most of their income comes from tax-payers through the state budget. Nonetheless, food prices in Iceland are much higher than in most other European countries. The farming lobby is entrenched in both center-right parties, which gained an outright parliamentary majority in the last election [in] 2013.

Those were the parties that ruled the country from 1995 to 2008 and bore the major responsibility for its financial ruin. After heroic efforts to clean up the mess, the left-wing government, which came to power after the so-called “Pots and Pans Revolution” in 2009, had become thoroughly discredited and unpopular. As a matter of fact, the only consistently pro-European party in Iceland is the Social-Democrats. They negotiated Iceland’s membership in the EEA-agreement (1989-94), while all other parties were at one time or another against.

In the political trauma in the wake of the crash, the Social-Democrats mustered a parliamentary majority for accepting an application for EU membership. Their Left-Green partners, who are against EU membership, opted for not opposing negotiations, but maintained their right to turn against the agreement in the end.

© Shutterstock

© Shutterstock

What is the current situation then on Iceland’s membership application? The government parties, with their strong parliamentary majority, are against membership. They have not formally withdrawn the application but [have] put it on hold and dissolved the negotiations team. This is incomprehensible in light of the fact that both parties made it their election pledge to hold a referendum on the negotiated outcome. A clear-cut majority, according to the polls, wants to be allowed to vote on the outcome in such a referendum, even if a majority is still against membership. What does this mean? It means that Iceland will remain outside the European Union for as long as we can see. The only thing that can change this is a new economic shock, drastic enough to force the people to reconsider.

Ziabari: Iceland was hit hard by the financial crisis, as the country experienced a systemic banking collapse, being the largest downfall experienced by any country in economic history. All three major banks in Iceland collapsed, and Prime Minister Geir Haarde warned that the country was close to “national bankruptcy.” How can Iceland recover from the ailments of the economic crisis? Did the fact that you were not a member of the eurozone influence the Icelandic economy in a positive manner?

Hannibalsson: Despite enduring myths, propagated by international media with the diligent help of the president of Iceland — maintaining that Icelanders simply refused in a referendum to pay “other people’s debt” — the simple truth is that Iceland is heavily burdened by debt. This applies to the state, the municipalities, many companies and households. And far from having recovered from the crisis, Iceland is still covered by financial landmines left over from the crash. How come? Before the crash, a lot of speculative capital, seeking short-term profit from Iceland’s “strong” currency and exorbitant interest rates, became locked in the country due to IMF-imposed capital controls. And although foreign banks — mainly German, being the main creditors of the fallen Icelandic banks — have written off their loans, they have sold their claims on the bankrupted banks in the aftermarket at fire-sale prices.

The current owners of those claims are mainly American hedge-funds. The IMF-imposed capital controls, which were meant to be short-term, have now lasted for more than six years. Although everybody agrees that they are hindering foreign direct investment and long-term economic growth, neither the government, nor the Central Bank has come up with a solution. If those capital controls were to be lifted on short notice, it would mean a new major collapse of the national currency. A potential disaster is hiding around the corner. In this sense, the 2008 financial crisis is still ongoing, as far as we are concerned.

Some commentators — and certainly the ship-owners’ lobby — maintain that being outside the eurozone at the time gave Iceland enough flexibility to correct a hugely imbalanced economy by devaluating the currency.

© Shutterstock

© Shutterstock

It would be nearer to the truth to speak about the collapse of the currency (50-70%). Devaluation on this scale has drastic economic and social consequences. Yes, it’s good for exports — ship-owners, foreign aluminum companies and tourism. But it is extremely bad for almost everybody else. It is especially bad for those who were indebted in foreign currency, including most companies and one-third of households. For those parties, the capital stock of debt doubled and inflation in the wake of devaluation meant exorbitant interest rates.

Those indebted in domestic currency were not much better off. The reason is that in Iceland debt service is automatically linked to the consumer price index (CPE). This applies to mortgages and long-term loans. Automatic indexing of debt was meant to be a short-term fix against inflationary pressures. In the long-term, it has had the unforeseen consequences of relieving banks and other creditors of all risks and placing the consequences of economic mismanagement and fluctuations squarely on the shoulders of the debtors. Icelanders are now in a debtors’ prison.

Would we have been better or worse off within the eurozone? If we would have been forced by the [European] Commission and the ECB [European Central Bank] to pay every penny of the foreign-denominated debt by our fallen banks — ten-times our national GDP — the whole of eternity would not have been long enough to pay up. Remember, it was the hapless Irish government at the time (September 2008) that imposed upon Irish taxpayers to pay their banksters’ debts. The way the EU — read Germany — treated Greece and Cyprus is of course calamitous. Can you imagine the US Federal Government and the Federal Reserve treating the black hole of Californian state finances in the same way?

But look at the case of Estonia. Their contraction of GDP was greater than ours. Luckily, they didn’t own the banks. They were all foreign-owned. But households and companies were heavily indebted. Estonians decided to tie themselves to the mast and ride out the storm. They accepted considerable reduction in wages and salaries without murmur. That is called internal devaluation. But they did not devalue their currency and stuck to their declared aim of adopting the euro. The capital stock of debt did not double and interest rates remained low — whereas in Iceland they went beyond 30%. The question remains: Which is better in the short-term, devaluation or a stable currency? In the long-run, devaluation is an addictive disease that ultimately destroys a healthy economy. Look at Argentina: any further questions?

Ziabari: China is gradually taking over the United States as the world’s largest economy. Chinese goods are exported to virtually every country, and the dynamic labor force the nations benefits from is making the impossible possible: to become the world’s most prosperous economy. How is Iceland’s political and economic relations with China? Are you trying to benefit from Beijing’s technological and economic achievements and build on their experiences to improve your own economy?

Hannibalsson: Some two years ago, Icelanders were taken by surprise when a Chinese entrepreneur, with close ties to the Communist Party, proposed to buy vast tracts of land — about 3% of Iceland — in the interior. In this barren and inhospitable region, the Chinese businessman proposed to build golf courses and luxury hotels, Las Vegas style. The government was caught utterly unprepared. As a partner in the EU internal market through the EEA, Icelanders enjoy the four freedoms, including the rights of establishment and employment in EU countries. The same applies to EU citizens in Iceland. Apart from those rules, which do not apply to citizens of other countries, the authorities have dealt with this issue on a case by case basis.

But 3% of the country was too much. Was this the beginning of a Chinese buying spree in Iceland? After some delay and a lot of confusion, the Chinese investor received an offer to rent a much smaller tract of land, which he refused.

Apart from this incident, Icelandic-Chinese relations have been excellent. As a matter of fact Iceland has already concluded a free trade agreement with China, ahead of the EU. Some commentators consider this to be a part of a long-term strategy for dealing with the future consequences of climate change in the Arctic region of the High North, including our huge neighboring country, Greenland. The icecap in this region is rapidly receding, giving access to a wide range of plentiful resources, including oil and gas, and opening up new shipping lanes and trade routes between Asia, Europe and North America.

The Chinese presence is already felt in Greenland. Chinese scientists are highly active in the region. With the new trading routes opening up, there will be a need for major trading hubs in ice-free harbors. Both Iceland and Norway can offer such facilities, but Iceland has the edge of being closer to Greenland. If those ideas are to be realized, it will call for major investments. If and when capital controls will be lifted, two of the restored commercial banks in Iceland are up for sale. There are rumors that the Chinese State Bank has already expressed interest.

High officials from China are frequent visitors in Iceland. At the same time, the US has withdrawn from the region, closing down their naval base in Iceland in 2006 after a continuous presence since World War II. The Arctic Council, with headquarters in Tromsö, Norway, is the regional body for consultations between the eight member states: Russia, Finland, Sweden, Norway, Denmark (on behalf of Greenland), Iceland, Canada and the United States. The EU has, so far unsuccessfully, sought to gain an observer status. The big question in the High North in the near future is: Will the Arctic Council states be able to settle their differences and solve inevitable conflicts of interest peacefully, or will there be a 19th century-style grab for resources?

Ziabari: Iceland was one of the first European countries to recognize Palestine as an independent state, and one of the few Western nations that voted in favor of the UN General Assembly Resolution 67/19, which granted Palestine a non-member observer state status at the United Nations. Was there any pressure on Iceland from the United States or Israel to vote against the resolution and refuse to recognize Palestine? What’s your view on Palestine’s bid for gaining full UN membership? Should Israel retreat from the territories it occupied in the 1967 war?

Hannibalsson: Were we under pressure not to vote for Palestine’s UN observer status and not to grant recognition of Palestinian statehood? You bet we were. George Mitchell, the White House special envoy in the Middle East, Nicolas Burns, the deputy secretary of state, and ultimately Madame Hillary Clinton herself tried to dissuade our foreign minister — my successor and friend Ossur Skarpheoinsson — from doing the right thing. He listened politely to their arguments but found them deficient.

We have to face the facts: The US has, beyond any reasonable doubt, failed in its self-imposed role as an honest broker between Israel and Palestine. Israel is not respecting any obligations imposed upon it by international agreements and international legal norms. Their treatment of the Palestinian people is reprehensible beyond words. It is also shameful that the international community has done so little to relieve the torture of the Palestinian people by the Israeli prison wardens in the biggest prison on earth: Gaza. Did anyone mention the Warsaw ghetto?

After the Nazi holocaust we, Nordic Social-Democrats, have been raised as ardent supporters of the rights of the Jewish people to settle in their ancient homeland. It was the Icelandic UN ambassador, by the way, who presented the proposal before the General Assembly on the partition of Palestine and the establishment of the Israeli state in 1948. The viability of that state is, of course, dependent on that state being able to coexist in peaceful relations with its neighbors.

The present extremist leadership of the State of Israel seems to be hell-bent on its own self-destruction. The repeated massacres of defenseless civilians, women and children, in their onslaught on the imprisoned population of Gaza, are nothing short of war crimes. Through its continuous economic and military support of Israel, the US government must accept sharing the guilt of those crimes. The US government has forfeited all trust to act as an honest broker in this tragic conflict. It is up to the international community to seek other means. The UN bears a heavy responsibility for securing the life and liberty of the Palestinian people and their right to their own state in their part of Palestine. Palestinian statehood and full membership of the UN is a sine qua non of a solution to this conflict.

Ziabari: Icelandic authorities recently closed down a website hosted in New Zealand with a “.is” domain name, which is said to have been associated with the Islamic State (IS) to promote the terrorist organization’s ideology. I have two questions. First, do you think the Islamic State is representative of Islam and Muslims? And second, why do you think many Western citizens are joining IS?

Hannibalsson: Yes, I do think that ISIS [Islamic State] is some kind of a deformity of religious fanaticism. Religious fanaticism, in whatever disguise it is hiding, is among the worst plagues pursuing humanity. Kidnapping innocent persons and beheading them in front of TV cameras is barbarism that is inexcusable — and even more so if the criminals try to do it in the name of religion. If moderate Muslims complain of growing Islamophobia in the outside world, the best way to stop it is to clean up those dens of fanaticism that are brainwashing young people to join their evil cause in the name of religion.

Separation of church and state is the best example that Western civilization has to offer to the rest of the world. By being excluded from the corridors of power, the church lost its monopoly on thought control. That meant the beginning of freedom of thought, freedom for scientific inquiry. Without this, the scientific and technological revolution — which transformed human society and kept alive the hope of eradicating poverty, ignorance and superstition — would be impossible. This way, religion was relegated to the private sphere. You can believe in whatever you want to, but please don’t bother me with it.

I am all for keeping open escape routes for poor people fleeing tyranny or seeking to improve their lot. But the basic rule for successful integration is that immigrants should abide by the laws and regulations of their host country. If part of their heritage, be it sanctioned by religion or law in the home country, is incompatible with the law of the host country, the law of the host country should prevail. I am talking about practices such as sexual mutilation of girls, child marriages, honor killings, etc. There is an old Icelandic saying: “Með lögum skal land byggja – en ólögum eyða” – under the law we build our land, but without it we destroy it.

Ziabari: As a European diplomat, what’s your assessment of ongoing talks between Iran and the P5+1 over Tehran’s nuclear program? Do you welcome the new opening between Iran and the international community under President Hassan Rouhani? Will he able to clinch a final, comprehensive agreement with the P5+1?

Hannibalsson: The destructive power of the nuclear bomb is such that mankind cannot feel safe with nuclear bombs in the hands of the power elites of this world. The biggest mistake ever made by Western powers — the US and France — was secretly to assist and abet Israel in acquiring nuclear bombs, reportedly 100 by now. With the threat of this destructive power behind them, the religious fanatics now in control in Israel have ceased abiding by any laws or norms of international behavior and are a lethal threat to all their neighbors.

Nuclear power spreads under the law of deterrence. The US was the first to build and use nuclear bombs to massacre innocent civilians in Nagasaki and Hiroshima. In the Cold War, this meant that the Soviet Union had to build its own nuclear arsenal. The balance of power during the Cold War was based on this madness mutually assured destruction — MAD. When [Gen.] Mao’s China fell out with the Soviet Union, China had to develop their nuclear deterrent. So they have. That meant India felt unsafe unless they had their own deterrent. This meant that Pakistan had to get nuclear bombs of its own. So they have. Under this logic, those who live in the shadow of Israel’s nuclear deterrent desperately feel the need to get their hands on the bomb. So this inherent logic of nuclear deterrence will continue ad infinitum, including nuclear bombs in the hands of the lunatics in North Korea.

How are we going to stop this madness from spreading around the globe, ensuring the ultimate annihilation of humanity and life on this planet? By getting rid of nuclear bombs. A good beginning would be to start by obliterating Israel’s arsenal. Then Iran would not feel any need for a bomb. Then start talking like civilized persons to one another. That is why we should all welcome President Rouhani’s opening.

Fair Observer is a nonprofit organization dedicated to informing and educating global citizens about the critical issues of our time. Please donate to keep us going.

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.

Photo Credit: Jorisvo / Denniro / Felix Lipov / Dean Drobot / Piotr Zajc / File404 /


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