VZCZCXYZ0010
RR RUEHWEB
DE RUEHRK #0322/01 3131701
ZNY SSSSS ZZH
R 091701Z NOV 07
FM AMEMBASSY REYKJAVIK
TO RUEHC/SECSTATE WASHDC 3492
INFO RUEKJCS/SECDEF WASHDC
RHMFISS/HQ USEUCOM VAIHINGEN GE 0065
RHMFISS/HQ USAFE RAMSTEIN AB GE
RHMFISS/COMNAVREG EUR NAPLES IT
RULSJGA/COMDT COGARD WASHINGTON DC
RUEHZG/NATO EU COLLECTIVE
RUEKDIA/DIA WASHDC
RUEAIIA/CIA WASHDC
S E C R E T REYKJAVIK 000322
SIPDIS
SIPDIS
DEPT FOR EUR/NB, EUR/RPM
OSD-P FOR DAVID CATE
OSD RESERVE AFFAIRS FOR ASD HALL
E.O. 12958: DECL: 11/06/2017
TAGS: PREL MARR PGOV PINR IC
SUBJECT: ICELANDIC DEFENSE POLICY ONE YEAR AFTER U.S. WITHDRAWAL
Refs: A) 06 Reykjavik 85 B) 06 Reykjavik 357
C) 06 Reykjavik 359 D) 06 Reykjavik 364
E) 06 Reykjavik 401 F) Reykjavik 01
G) Reykjavik 69 H) Reykjavik 99
I) Reykjavik 192 J) Reykjavik 247
K) Reykjavik 298
Classified By: Amb. Carol van Voorst for reasons 1.4 (b) and (d).
1. (C) Summary: A year after the closure of U.S. Naval Air Station
Keflavik and the withdrawal of permanent U.S. forces from Iceland,
Post agrees with Prime Minister Haarde that the turnover went better
than either party expected. After recovering from the initial shock
of our base closure notification in March 2006, the Icelandic
Government has solidified its defense links with its neighbors and
within NATO, successfully hosted U.S. and NATO ship visits as well as
a multinational air defense and counterterrorism exercise,
strengthened its Coast Guard in resources and in international ties,
and begun canvassing for NATO air policing support. Former base
properties now house university students and academic research
centers. Although several difficult issues remain -- intelligence
cooperation and the future of the air defense radar system among them
-- they are partially due to domestic political considerations, and
will be solved as the new coalition government settles in. With
climate change, a likely increase in North Atlantic energy shipments,
a new focus on Arctic resources, and a more visible Russian presence,
the High North could easily reemerge as an area of high strategic
importance in the decades ahead. U.S. interests in the region will
be well served by encouraging Iceland to continue to develop its
security and defense capabilities while we keep our defense
options--including access to the base--open. End Summary.
From protests to robust joint efforts
-------------------------------------
2. (C) When we notified the Icelandic Government in March 2006 of
the decision to close U.S. Naval Air Station Keflavik (NASKEF) in six
months, bitter disappointment and, in some quarters, outrage were
evident. Commentators predicted the end of the bilateral
relationship and opined that the 1951 U.S-Iceland Defense Agreement
was now worthless. Former Prime Minister David Oddsson let it be
known that had he been in office, he would have immediately abrogated
the treaty and ejected the U.S. military ahead of the September
deadline. Minister of Justice Bjorn Bjarnason, considered by many
the most pro-U.S. and pro-NATO member of the cabinet, acidly
questioned U.S. dependability in defense matters.
3. (SBU) A year after NASKEF's closure, the state of the bilateral
relationship is quite different from the gloomy predictions. This
past August, Prime Minister Haarde told former lead negotiator ASD
Tom Hall and Commander U.S. Air Force Europe (USAFE) General Tom
Hobbins that "no one could have imagined a year ago how well things
would turn out." Negotiations in 2006 resulted in a technical
agreement to close the base and a political Joint Understanding
pointing the way forward. The continuing defense relationship was
then made visible to the public by cooperation on two major ship
visits, a search-and-rescue training visit by a U.S. P-3 aircraft,
and a large-scale multinational air defense and counterterrorism
exercise. Links between the Icelandic and U.S. Coast Guards -- both
bilaterally and within the newly-formed North Atlantic Coast Guard
Forum -- continue to grow in depth and breadth. Exchanges in law
enforcement training and operational information have shown results
in counter-narcotics and document fraud detection work. Politically,
we have worked together at NATO to gain consensus on a peacetime air
defense plan for Iceland; transferred Iceland's air defense radar
system and are nearing completion of future support arrangements; and
held the first round of high-level Security Dialogue consultations as
outlined in the Joint Understanding.
Looking beyond the bilateral relationship
-----------------------------------------
4. (C) Outside the bilateral field, PM Haarde has pressed ahead with
a strategy of greater engagement with Iceland's neighboring NATO
Allies. In early 2007, Iceland signed agreements with Norway and
Denmark on increased defense and security cooperation, and began
talks with the UK and Canada along the same lines. Despite a change
in government (and Foreign Minister) in May, the GOI has continued to
flesh out the earlier agreements. These efforts have resulted in
increased visits by Danish Navy and Coast Guard vessels, as well as
the participation of Norwegian and Danish forces in the NORTHERN
VIKING air defense and counterterrorism exercise in August 2007.
Norway was among the first NATO Allies to show interest in providing
aircraft for air policing in Iceland. MFA efforts to secure periodic
air policing represent a welcome change in Iceland's traditional
approach to defense: a recognition that Iceland must assume more
responsibility and, to accomplish this, must be more active within
the Alliance in promoting its own affairs. The recent MFA briefing
for all resident NATO ambassadors on air policing was a first: a
true lobbying effort directed at capitals. The brief was a shrewd
sales pitch, including pledges of significant host nation support for
the mission, which would be funded out of the first-ever defense
budget in the Icelandic government's history. This budget ($8.6
million of a total GOI budget of $6.9 billion) is a concrete
acknowledgment that Iceland has realized it needs to provide more for
its own defense.
5. (C) Along the same lines, the GOI has boosted efforts to provide
for greater domestic security. In the last year, the Icelandic Coast
Guard (ICG) has awarded contracts for a new patrol vessel and
fixed-wing aircraft, while also leasing three search and rescue (SAR)
helicopters to replace the USAF helos that previously provided SAR
backup. Minister of Justice Bjarnason, who controls the ICG, has
been developing a plan for procurement of permanent helo support and
has been discussing joint purchases with the Norwegian SAR
authorities. The ICG has also continued a practice of robust
international deployments of the ICG Explosive Ordnance Disposal
(EOD) team to peacekeeping operations, most recently in Lebanon in
the winter of 2006-2007. Post has encouraged the MOJ and ICG to make
their procurement and training plans with an eye towards maintaining
the capacity to deploy abroad in NATO or UN peacekeeping operations.
6. (U) Smart governance has also mitigated the local impact of
NASKEF's closure on the community of Reykjanesbaer/Keflavik. Job
losses, initially feared to be in the hundreds, were minimal as all
but a handful of 700-plus former NASKEF employees found new work.
This was due to quick engagement by the outgoing NASKEF/Iceland
Defense Force command and the town of Reykjanesbaer in providing job
referral and counseling services, helped by the robust Icelandic
economy and a low unemployment rate. Similar focused planning and
creative thinking are turning the base facilities into a significant
plus for the economy and society. On the first anniversary of the
March 2006 base closure notification, the Government of Iceland
announced plans to create a university-level academic institution on
the former NASKEF site. The "Keilir Atlantic Center for Excellence"
has already begun operations. Among other initiatives, it hosted
productive meetings with U.S. Assistant Secretary of Energy for
Energy Efficiency and Renewable Energy Alexander Karsner and the
Director of the U.S. National Renewable Energy Laboratory during
summer 2007. Discussions are underway about a formal relationship on
renewable energy research. Meanwhile, the Keflavik Airport
Development Corporation (KADECO), established to handle other
commercially viable real estate on the base, opened 1100 apartments
for rental by eager university students and brought in nearly $270
million from the sale of other buildings on the base.
Remaining Issues: Intelligence, Division of Labor
--------------------------------------------- ----
7. (S) Despite progress, some areas of difficulty remain,
particularly in the fields of intelligence-sharing and the operation
of the Iceland Air Defense System (IADS). These issues are rooted in
domestic political battles. On intelligence matters, Icelandic law
does not authorize any collection other than for law enforcement
purposes, and the MFA and Justice Ministry are consequently engaged
in a turf battle over the intelligence portfolio. The MFA has
responsibility for coordination with NATO Allies on defense matters
while police, under the authority of the MOJ, handle international
law enforcement cooperation. At the same time, the MOJ-controlled
Coast Guard and "Viking Squad" special police are the units most
likely to operate together with NATO military units during exercises
in Iceland and elsewhere. As such, the MFA and MOJ have been the
main players in a tug-of-war over intelligence authority, a battle
which has thus far stalled serious efforts to provide USG training
and institute regular intelligence exchanges (a stated goal in the
Joint Understanding).
8. (C) Similarly, the MOJ has tried to grab authority for operation
of the IADS air defense radars from the MFA, with Minister Bjarnason
arguing that in peacetime the system plays more of a "homeland
security" role than a defense role. Though this argument has not yet
produced any results, it has been a distraction in the MFA's task of
reorganizing the Iceland Radar Agency (the state-owned corporation
that operates IADS) in order to cut costs. The press has been quick
to note that recent management decisions have been handled clumsily.
However, the MFA plans to introduce legislation this winter to
formally bring the Radar Agency under its authority and clarify the
agency's status under Icelandic law. Likely to go unaddressed are
ongoing questions regarding combat controllers and rules of
engagement for IADS and any NATO air defense assets it operates with,
meaning that continued bilateral and NATO engagement on this matter
will be necessary.
9. (C) A further complication is posed by incoming Foreign Minister
Gisladottir, who is struggling to reconcile her instinctive
discomfort with the use of force to the defense and security
responsibilities in her portfolio. The Social Democratic Alliance
(SDA) party she leads has never been able to agree on a defense
policy, not least because of its fairly large pacifist wing. After
some early stumbles -- e.g., announcing the news of Iceland's
withdrawal from the NATO Training Mission Iraq on the day of SACEUR's
visit to Reykjavik in September -- Gisladottir has proven to be an
interested student on defense issues. Even her strong reluctance to
allow Icelandic peacekeepers to be armed while abroad may be
softening somewhat in response to interlocutors' arguments that
unarmed peacekeepers can be as much of a force protection burden as
they are an asset to deployed units. Both her senior Political
Advisor and the MFA Defense Department Chief have told the Ambassador
in recent weeks of her keen desire for additional information and
discussion in security matters. Continued engagement and exposure
will likely prove the best means to develop the Foreign Minister into
a long-term partner.
The Road Ahead
--------------
10. (C) This fall, Minister of Justice Bjarnason and others in
Iceland have been nearly overcome with "I told you so" fever in
response to increased Russian air activity and renewed territorial
claims in the Arctic. To these observers, the decision to close the
base was a strategic mistake: climate change, increased shipping
routes and oil exploration in the North Atlantic and Arctic, and a
resurgent Russia will make the High North (and Iceland) more
strategically significant in the future, not less. Post has
countered that the current status quo--ongoing support for the 1951
Agreement combined with first class maintenance of base military
facilities, periodic exercises, and an agile U.S. and NATO force
structure--keep our options open.
11. (C) To that end, our military engagement with Iceland should
continue along current lines. Regular exercises and operational unit
visits will demonstrate the U.S. interest in and ability to live up
to our bilateral commitment. We should show support and provide
training opportunities for the Icelandic units most likely to be
called on in a crisis. Initial discussions for the NORTHERN VIKING
2008 exercise have focused on a USN role with the possibility of USCG
involvement, which meshes perfectly with this aim. While
arrangements for a more robust intelligence relationship depend on
Icelandic domestic political decisions, we should continue to offer
our assistance and make clear what is available once local obstacles
are overcome. Similarly, post will continue to explore ways to
increase Icelandic participation in U.S. training opportunities, of
which the GOI has not thus far taken full advantage. A crucial tool
in our progress thus far has been EUCOM's provision of an activated
reserve officer to support Embassy Reykjavik. This position serves
as the key link between the USG and Icelandic government institutions
recalculating their strategic worldview and seeking to improve their
security capabilities. Embassy Reykjavik believes funding for this
position beyond spring 2008 will be essential in helping Iceland's
transformation into a more active and capable NATO ally.
12. (C) Politically, we should continue to support Iceland's efforts
to increase its defense ties with other NATO Allies and neighbors.
We also want to quietly but strongly support efforts to improve the
quality of the national discussion on defense and security affairs,
such as the FM's appointment on 8 November of a working group to
study Iceland's strategic environment. Continued expert- and
high-level discussions under the Security Dialogue rubric are a
further means of engagement and should be maintained, particularly as
Iceland faces up to the possibility of winning election to the UN
Security Council for the 2009-2010 term. We should accommodate the
request for a second series of discussions at the U/S level, in late
winter/early spring, if possible in the U.S. These steps will help
ensure that we and the Icelanders will be in sync as the security
environment in the High North evolves.
van Voorst