VZCZCXRO8502
PP RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSL RUEHSR RUEHVK
RUEHYG
DE RUEHRK #0129/01 2091725
ZNR UUUUU ZZH
P 281725Z JUL 09
FM AMEMBASSY REYKJAVIK
TO RUEHC/SECSTATE WASHDC PRIORITY 4126
INFO RHEHNSC/NSC WASHINGTON DC PRIORITY
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 02 REYKJAVIK 000129 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EUR DAS GILCHRIST, EUR/NB, INR/B 
NSC FOR HOVENIER 
 
E.O. 12958: N/A 
TAGS: PGOV PREL PINR EUN IC
SUBJECT:  ICELAND MOVING FORWARD WITH EU MEMBERSHIP PROCESS 
 
¶1. (U) Summary: Iceland is swiftly moving forward with the EU 
membership process and accession could come as early as 2012.  The 
issue remains contentious in Iceland with current popular opinion 
reportedly split down the middle.  Ultimately, the decision will 
likely come down to a national referendum that could take place in 
late 2011 or early 2012.  Organizations on both sides of the 
argument are already trying to get out in front of the issue and 
influence the public well in advance of the referendum.  End 
Summary. 
 
The Process 
--------------- 
¶2. (U) When Iceland's Foreign Minister, Ossur Skarphedinsson, 
presented his country's official application for EU membership in 
Sweden on July 23, it commenced a lengthy process that likely won't 
conclude until late 2012 or early 2013.  The first hurdle was 
overcome on July 27 when the foreign ministers of the twenty-seven 
EU member states discussed the issue at a meeting of the General 
Affairs and External Relations Council in Brussels.  The Council had 
no objections to Iceland's EU application and sent the matter on to 
the European Commission for further study.  The Commission, which is 
comprised of twenty-seven commissioners who are bound to support the 
interests of the EU rather than their home states, will review 
Iceland's candidacy based upon its ability to fulfill the Copenhagen 
criteria--a series of measures that assess a candidate country's 
ability to adhere to the political, economic and monetary 
requirements of the EU. 
 
¶3. (U) The Commission then turns its completed report over to the 
European Council, which is comprised of the heads of state or 
government of the EU's member states along with the President of the 
European Commission.  The Council must unanimously agree to grant 
Iceland the status of an applicant country.  A meeting of the 
European Council is scheduled for December and it is possible that 
Iceland's candidacy could be voted on at that time.  If the European 
Council grants Iceland candidate status, then accession negotiations 
will probably begin shortly thereafter in early 2010.  The 
negotiating process could take up to three years, but will likely be 
shorter since Iceland has already adopted much of the EU's laws and 
regulations through its membership in the European Economic Area 
(EEA) agreement and its status as a Schengen country. Once the 
negotiations are complete, a treaty of accession will be signed, 
which must be ratified by each individual EU member state, as well 
as the parliaments of the EU and Iceland. 
 
¶4. (U) Before Iceland's parliament approves this final treaty, 
however, Iceland intends to hold a referendum on the subject, 
probably in 2011 or 2012.  The referendum process is expected to be 
a contentious affair as current public opinion on the issue is 
split.  Media sources are currently reporting that about forty 
percent of the population is pro-European and an equal percentage is 
against the proposal with the remaining twenty percent undecided. 
Referendums under the parliamentary constitution are not legally 
binding, but the Icelandic government has stated that the "will of 
the people" would ultimately determine if Iceland enters into the 
EU. 
 
The Pro-European Argument 
--------------------------- 
¶5. (SBU) Pro-European groups are already mobilizing in an attempt to 
influence public opinion, well in advance of the referendum. 
EmbOffs met on July 23 with two leading members of an organization 
named the European Movement, which is emerging as one of the main 
pro-Europe voices in the debate.  They were both quick to stress 
that Iceland, following the bank collapse last October, desperately 
needs the stability that EU membership can provide.  Specifically, 
they said, the Euro was needed because it would bring stability 
through lower interest rates, lower food prices, lower mortgage 
prices, and less inflation. 
 
¶6.  (SBU) They said that most of the supporters for entry into the 
EU are comprised of educated professionals in the higher income 
brackets.  They also suggested that basically all industries, except 
for the fishery and agriculture sectors, support EU membership. 
Interestingly, younger people, who historically have supported EU 
membership, seem to currently be gravitating away from that view. 
This greatly disappointed and perplexed them and they posited that 
perhaps the anti-European groups were utilizing technology more 
effectively than their organization.  The anti-European message, 
they suggested, can more easily be condensed into a few words and is 
therefore more digestible to younger people via SMS and Twitter. 
They said that their organization intends to adjust its tactics and 
will make young people a prime target of their education campaign. 
 
¶7.  (SBU) They also expressed their belief that the controversial 
Icesave issue needs to be resolved before the EU process can gain 
 
REYKJAVIK 00000129  002 OF 002 
 
 
any real traction. (Note: A bill is currently being debated in the 
Icelandic Parliament which would guarantee the repayment of billions 
of dollars to citizens from Britain and the Netherlands who held 
Icelandic accounts prior to the banking collapse in October.  End 
Note.) They said that despite politicians' claims to the contrary, 
there is a definite connection between the need to pass the Icesave 
bill and Iceland's quest for EU membership.  Iceland, they said, 
will not have any credibility in the eyes of the EU unless it steps 
up to the plate and takes responsibility for the Icesave debt. 
 
The Anti-European Argument 
----------------------------- 
¶8. (SBU) The anti-European movement is also strongly working to get 
out its message.  EmbOffs met on July 24 with a spokesperson for a 
group called Global Perspective which appears poised to become the 
main opposition voice in the debate over Icelandic EU membership. 
He said that the primary drawback to joining the EU for Iceland is 
the loss of sovereignty and independence.  He also suggested that 
the Icelandic fishing industry would be damaged irreparably by 
joining the EU.  The EU, in his opinion, is likely to abolish the 
200 nautical mile fishing zone that Iceland has established, 
effectively opening up Iceland's territorial waters to fishing by 
other countries.  Even if Iceland were able to hold on to its 
territorial waters through negotiation, the Global Perspective 
spokesperson felt that EU rules would be so restrictive, dictating 
even what type of fishing lines Icelandic fishermen can use, that 
the fishing industries would be crippled. 
 
¶9. (SBU) Joining the EU, he added, would also be the death knell to 
the agricultural sector in Iceland.  The EU, he said, would likely 
force Iceland to do away with the government subsidies and 
protectionist tariffs that keep Icelandic agricultural products from 
becoming prohibitively expensive.  Without this government support, 
he claimed, over 70 percent of Icelandic farmers would go out of 
business.  This statistic was true, he said, even if Iceland is able 
to negotiate a deal similar to what Finland achieved in which it had 
been able to keep some government subsidies in place for 
agricultural goods grown above a latitude of 62 degrees--an 
exemption provided by the EU in acknowledgment that farmers 
operating in such northern climates are at a significant 
disadvantage as compared to their European counterparts who work in 
more temperate climes. 
 
¶10. (SBU) Ultimately, he felt that Iceland would follow a path 
similar to Norway, where voters have twice voted against membership 
in major European institutions in national referendums (Note: Norway 
voted against the EC in 1972 and against EU membership in 1994. End 
Note.)  He felt that negotiations would go slowly and that EU 
fatigue would set in with the Icelandic population.  The process 
could slow down even further, he suggested, due to the bureaucracy 
of the EU, specifically because there will be a new European 
Commission this year.  This Commission, he suggested, may be unable 
to complete its work in time for the vote by the European Council in 
December. 
 
¶11. (SBU) Comment:  Iceland is a fiercely independent nation that 
has long cherished its autonomy.  However, the banking crisis was a 
serious jolt to this insular society and has made the once 
unthinkable idea of EU membership a very real possibility.  A final 
decision on the matter is several years down the road and will 
likely depend on Iceland's economic situation at that time.  While 
much press has centered on the possibility of fast-tracking 
Icelandic accession into the EU, the Ministry of Foreign Affairs was 
quick to note that accession by 2012 would be "ambitious, and a 
best-case scenario."  If a near term positive economic recovery 
takes place, Icelanders may be quick to see the banking crisis as a 
blip on the screen and revert to their more autonomous tendencies. 
If the hard times linger, however, EU membership may be a much more 
realistic possibility.  Polling after the economic crisis hit in 
October 2008 showed a high degree of support for immediate entry 
into the EU; current polls have seen significantly reduced support 
for EU accession. 
 
¶12. (SBU) Support for entering into negotiations for Iceland's 
accession into the EU does not necessarily mean that Icelanders 
support its ultimate entry.  Many Icelanders are interested in 
seeing what kind of deal can be negotiated with the EU, but are not 
going to accept just any proposal that is put forward.  Although 
Icelanders are attracted to the stability that the Euro would 
provide, many are unwilling to make tough concessions in the fishing 
and agriculture industries.  As a result, the battle over the EU 
accession has only just begun.  End Comment. 
KLOPFENSTEIN