VZCZCXYZ0020
OO RUEHWEB

DE RUEHRK #0233/01 2211614
ZNY CCCCC ZZH
O 091614Z AUG 07
FM AMEMBASSY REYKJAVIK
TO RUEKJCS/SECDEF WASHDC IMMEDIATE
RHMFISS/HQ USAFE RAMSTEIN AB GE IMMEDIATE
INFO RUEHC/SECSTATE WASHDC IMMEDIATE 3401
RUEHZG/NATO EU COLLECTIVE

C O N F I D E N T I A L REYKJAVIK 000233 
 
SIPDIS 
 
SIPDIS 
 
USAFE FOR GENERAL HOBBINS 
OSD FOR ASD/RA HALL 
 
FROM AMBASSADOR VAN VOORST 
 
E.O. 12958: DECL: 08/09/2017 
TAGS: MOPS PREL MARR PGOV IC
SUBJECT: ICELAND SCENESETTER FOR EXERCISE NORTHERN VIKING 07 AND 
VISIT OF USAFE GEN TOMMY HOBBINS AND ASD THOMAS HALL 
 
Classified By: Amb. Carol van Voorst for reasons 1.4 (b) and (d). 
 
¶1.  (C) Your visit and NORTHERN VIKING 07 come as Iceland's 
government gets back to work after summer vacation, with a new 
governing coalition for the first time in 12 years.  The 
parliamentary election on May 12 strengthened Prime Minister Geir 
Haarde's mandate to govern.  The new Foreign Minister, head of the 
Social Democratic Alliance, the new junior coalition partner, is wary 
of us.  While clearly uncomfortable with the use of force, she is 
trying to assert control over defense matters in the government.  We 
have found her open to an exchange of views.  Bold initiatives on the 
use of the former NASKEF facilities have eased public resentment over 
the closure of the base, and a series of defense activities in 
Iceland are providing visible reassurance to the public that the U.S. 
remains committed to Iceland's defense.  Your visit and NORTHERN 
VIKING 07 build on the Washington bilaterals at State and Defense 
last October, as well as the visit of Under Secretary of State Nick 
Burns in June of this year.  All of this fulfills our Joint 
Understanding commitment to hold periodic high-level strategic 
discussions with the Icelanders as well as bilateral military 
exercises.  You will find your hosts more self-assured and more 
relaxed with us than they were last summer - and with a clearer 
concept of Iceland's role in NATO's North Atlantic neighborhood. 
 
¶2.  (SBU) You arrive three months after elections resulted in a 
strong new coalition government of PM Haarde's center-right 
Independence Party and the leftist Social Democratic Alliance (SDA). 
While the government is still in its shake-down period, the SDA's 
assumption of six of the twelve cabinet ministries is proceeding 
relatively smoothly.  The Prime Minister -- by a huge margin the most 
popular politician in Iceland -- remains a calm, pragmatic partner 
and a personable, witty interlocutor.  Although he has returned 
formal oversight of defense-related issues to the Foreign Ministry, 
Haarde continues to exert a strong influence on Iceland's foreign 
policy.  Haarde and his Independence Party colleagues are ecstatic to 
see NORTHERN VIKING 07 taking place, and you can expect him to make 
this clear during his meeting with you.  He may press for your 
thoughts on future U.S. exercises in Iceland. 
 
¶3.  (C) SDA chair Ingibjorg Solrun Gisladottir -- prickly, 
turf-conscious, outspoken, always controversial -- is adjusting to 
the change from opposition leader to Foreign Minister.  Gisladottir 
has made waves, however, by insisting that the coalition government 
agreement contain language "regretting" the war in Iraq.  She has 
also noted her general disapproval of the current U.S. 
administration.  Reflecting her perceived need to show some 
independence from the U.S. on security matters, the FM has waffled on 
how much public interest she wishes to show in NORTHERN VIKING. 
Gisladottir has apparently made a last-minute decision to attend and 
will accompany you and the Prime Minister to the all hands call and 
media events at the former NASKEF site on August 13. 
 
¶4.  (SBU) Putting the exercise in broader context, NORTHERN VIKING is 
the largest demonstration of the continued U.S. defense commitment to 
Iceland since the closure of NASKEF.  It builds on the June 14-18 
visit of Standing NATO Maritime Group 1 (SNMG-1) with USS NORMANDY as 
flagship, and the highly successful visit of the USS WASP last 
October.  We continue the work of wrapping up the remaining 
post-NASKEF legacy issues.  You can expect the Prime Minister to 
raise the Iceland Air Defense System (IADS), which the USG will stop 
funding on August 15.  Press interest in the IADS handover has been 
intense, and we will wish to stress that solid bilateral work by 
USAFE/DOD and the Icelandic Radar Agency and the MFA will ensure that 
Iceland takes over a functioning air defense system.  Equipment 
transfer and operating costs are a concern for a government that is 
budgeting for defense for the first time in its history, and are 
beginning to be aired in the press and discussed in parliament. 
Similar issues surround NATO Air Policing; progress at NATO has been 
excellent but questions of how Iceland will foot the bill for 
quarterly NATO air surveillance operation remain.  On both points, 
the Icelandic government feels public pressure to demonstrate that 
Iceland's security has not been compromised by the U.S. departure. 
 
¶5.  (SBU) In most areas, though, the message of moving on from Cold 
War-era constructs has taken root.  The government has signed MOUs on 
enhanced defense cooperation with Norway and Denmark, is buying SAR 
equipment from Canada, and is endeavoring to build more formal 
security ties with the U.K. and Germany.  The Icelanders are taking 
advantage of the first-rate facilities we left at Keflavik to create 
a university-level international education institution as well as a 
technology park.  Smaller-scale initiatives are thriving too; an 
experimental kindergarten with 80 students will open in a former base 
child care facility on August 15.  While making it clear that the 
U.S. "unilateral" departure still grates on Icelandic sensitivities, 
Icelandic politicians and citizens are increasingly enthusiastic 
 
about the economic potential of the former base.  Meanwhile, the 
Embassy's initiatives to broaden our ties to Iceland in such areas as 
trade and direct foreign investment, energy development, and 
scientific research are well-received by a public skeptical of USG 
policy but deeply fascinated by the U.S.  High-level visits by the 
U.S. Dept. of Energy and upcoming Congressional Delegations in the 
week following your visit have reinforced this spirit and will 
continue to do so. 
 
¶6.  (SBU) This vibrancy continues on the economic front, where you'll 
see ample evidence of a continuing economic boom in Reykjavik, thanks 
to utilization of fish and energy resources and leveraging of assets 
to invest abroad.  The Viking spirit of risk taking, acquisition, and 
swift decisiveness have all helped to multiply Icelandic holdings in 
Europe.  The U.S. market is likely the next target, and the business 
community has pressured the GOI for a free trade agreement with us. 
The Icelanders know the prospects are slim for the foreseeable 
future, but you may hear of their abiding interest. 
 
van Voorst