For the most current version of this Note, see Background Notes A-Z.

PROFILE

OFFICIAL NAME:
Republic of Iceland

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. 167,596). 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 ft.).

People
Nationality: Noun--Icelander(s). Adjective--Icelandic.
Population: 275,264.
Annual growth rate: 1.18%.
Ethnic group: Homogenous mixture of descendants of Norwegians and Celts.
Religion: Evangelical Lutheran, 91%.
Language: Icelandic.
Education: Compulsory up to age 16. Attendance--99%. Literacy--99.9%.
Health: Infant mortality rate--6/1,000. Life expectancy--men 76.3 yrs., women 80.8 yrs.
Work force (1998, 131,038): Commerce--14.9%. Manufacturing--12.9%. Fishing/fish processing--11.8%. Construction--10.7%. Transportation and communications--6.8%. Agriculture--5.1%. Unemployment: 1.5%

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 (Althingi). Judicial--Supreme Court, district court, special courts.
Subdivisions: 23 Syslur (counties).
Major political parties: Independence (IP), Progressive (PP), Alliance (A), Left-Green (G), Liberal Party (L).
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: $8.5 billion.
GNP growth rate: 4.2%.
Per capita GDP (1998): $31,406.
Inflation rate (1999): 4%.
Budget: $3 billion.
Annual budget deficit (1998): None.
Net public debt: $2.6 billion.
Foreign aid as part of budget: 0.15%.
Natural resources: Marine products, hydroelectric and geothermal power, diatomite.
Agriculture: Products--potatoes, turnips, livestock.
Industry: Types--aluminum smelting, fish processing, ferro-silicon production, geothermal power.
Trade: Exports--$1.9 billion: marine products 71%, other manufacturing products 22%, miscellaneous 5%, agriculture 2%. Partners--EU 65% (U.K. 19%, Germany 15%, France 7%, Denmark 5%); U.S. 13% ($247 million); EFTA 9%; Japan 5%. Imports (1998)--$2.4 billion: industrial supplies 26%; capital goods, parts, accessories 24%; consumer goods 20%; transport equipment 14%; food and beverages 9%; fuels and lubricants 7%. Partners--EU 56% (Germany 11%, U.K. 10%, Denmark 8%, Sweden 6%, Netherlands 6%); U.S. 11% ($268 million); EFTA 11%; Japan 5%.

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 11�C (52�F) in July and -1�C (30�F) in January.

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 Halldor Laxness. The literacy rate is 100%, and literature and poetry are a passion with the population. Per capita publication of books and magazines is the highest in the world. In a population of 265,000 people, 1993 data show five daily newspapers, 78 other newspapers, and 629 periodicals.

Kristjan Johannsson is Iceland's most famous opera singer, while pop singer Bjork is probably its best known artist in this century.

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, British military forces occupied Iceland. 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 4-year term, has limited powers. The prime minister and cabinet exercise most executive functions. The Althingi is composed of 63 members, elected every 4 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 (Independence Party--IP)
Foreign Affairs--Halldor Asgrimsson (PP)
Finance--Geir Haarde (IP)
Industry and Trade--Finnur Ingolfsson (PP)
Fisheries--Arni M. Mathiesen (IP)
Justice and Religious Affairs--Solveig Petursdottir (IP)
Environment, Nordic Coop.--Siv Fridleifsdottir (PP)
Agriculture--Gudni Agustsson (PP)
Transportation and Communications--Sturla Bodvarsson (IP)
Education and Culture--Bjorn Bjarnason (IP)
Social Affairs--Pall Petursson/Valgerdur Sverrisdottir (PP)
Health and Social Security--Ingibjorg Palmadottir (PP)

Ambassador to the U.S.--Jon Baldvin Hannibalsson
Ambassador to the UN--Unnar Palsson
Chairman of Althingi--Halldor Blondal (IP)

Iceland maintains an embassy in the United States at 1156 - 15th Street, NW, 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]. Iceland also has 20 honorary consulates in major U.S. cities.

POLITICAL CONDITIONS
In nationwide town council elections in 1994, 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. 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.

After four 4-year terms as the world's first and only elected woman president, the widely popular Vigdis Finnbogadottir chose not to run for re-election in 1996. More than 86% of voters turned out in the June 29, 1997 presidential elections to give former leftist party chairman Olafur Ragnar Grimsson a 41% plurality and relatively comfortable 12% victory margin over the closest of three other candidates. Traditionally limited to 6-12 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 successfully has used his largely ceremonial office to promote Icelandic trade abroad and family values at home.

In May 8 parliamentary elections, the ruling, conservative Independence Party gained one seat for a total of 26 of 63 seats in the Althingi. Its continued coalition partner, the Progressive Party, lost three seats for a total of 12. The newly established United Left took 17 seats, and the Left-Green alliance garnered six. In a surprise, the Liberal Party won two seats. More than 84% of the electorate came out to vote, which actually fell from over 87% in the 1995 election. Women now hold three ministries and account for 22 of 63 parliamentarians.

Parties in Government Independence Party (IP) 26
Progressive Party (PP) 12

Parties in opposition

Liberal Party (WL) 02
United Left (UL) 17
Left-Green Alliance (LG) 06

Total 63

ECONOMY
Marine products account for more than 70% of Iceland's total export earnings. 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. Exports and imports each account for one-third of GDP. Most of Iceland's exports go to the EU and EFTA 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; some tariffs range 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. The current unemployment rate stands at a record low 1%. Iceland's economy has experienced moderately strong GDP growth (3%) for the past 3 years. Inflation averaged merely 1.5% from 1993-94, and only 1.7% from 1994-95. Increasing economic activity is predicted again for 2000, and inflation is projected to increase to about 3% for 1999.

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 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. Nordural Aluminum is a wholly owned $180 million investment by Columbia Ventures of Washington State. The plant employs over 150 people and accounted for a 1% growth rate in Iceland's 1998 GDP.

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 airline, 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 historical international dispute involved disagreements with Norway and Russia over fishing rights in the Barents Sea, which the parties successfully resolved this year. 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, Iceland has not resumed whaling but has asserted the right to do so.

Icelanders have a strong emotional bond toward the Baltic States, and Iceland prides itself on being the first country to recognize their independence. Iceland also is the greatest Nordic contributor per capita to NATO-led troops in Bosnia and Kosovo, to police in Bosnia, and to Bosnia/Kosovo reconstruction, resettlement, and relief.

Membership in International Organizations
Iceland is a member of the following organizations: North Atlantic Treaty Organization; Organization on Security and Cooperation in Europe; Western European Union (associate member); International Bank for Reconstruction and Development; International Development Association; International Finance Corporation; Organization for Economic Cooperation and Development; European Economic Area; European Free Trade Organization; Council of Europe; International Criminal Police Organization; and the United Nations and most of its specialized agencies, including the International Monetary Fund, World Trade Organization, Food and Agricultural Organization, International Atomic Energy Agency, International Civil Aviation Organization, International Labor Organization, International Maritime Organization, International Telecommunications Union, UN Educational, Scientific, and Cultural Organization, Universal Postal Union, World Health Organization, and World Meteorological Organization.

U.S.-ICELANDIC RELATIONS
U.S. policy aims to maintain 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. A consistently reliable ally, Iceland has voted with the United States on virtually all major UN, NATO, and environmental issues.

In celebration of the 1000th anniversary in the Year 2000 of Leif Eriksson's voyage to North America, the United States has established a volunteer binational working group to coordinate a number of millennium activities with the Government of Iceland and interested parties. These activities will highlight, among other areas, shared culture, scholarship and research, scientific discovery and exploration, pioneer legacy, and the strong defense relationship between the countries.

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 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 anti-submarine warfare patrols. Iceland and the United States regard the ongoing U.S. military presence since World War II 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 will be renewed in 2001.

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' Meeting in Reykjavik in June 1987 and participates in biennial NATO exercises entitled "Northern Viking" in Iceland; the next exercises will be held in 2001. In 1997 Iceland hosted its first Partnership for Peace (PfP) exercise, "Cooperative Safeguard," which is the only multilateral PfP exercise so far in which Russia has participated. It will host another major PfP exercise in 2000.

Principal U.S. Officials
Ambassador--Barbara J. Griffiths
Deputy Chief of Mission--Doria Rosen
Political/Consular Officer--Bill Moeller
Economic/Commercial Officer--Ed Brown
Administrative Officer--Paul Blankenship
Communications Officer--Walter Yates
Public Affairs Officer--David Mees
Regional Security Officer--Ray Yates

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

[This is a mobile copy of Iceland (04/02)]