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¶6. (C) Skarphedinsson also spoke about defense issues 
including the closure of the Icelandic Defense Agency (IDA). 
Acknowledging the government's focus on Icesave, he 
nevertheless expressed optimism that a decision on IDA's 
future would come by year end.  Some of the IDA's duties 
would likely transfer to the Coast Guard, which falls under 
the Ministry of Justice.  He hoped, however, that most 
defense matters would remain with the MFA.  He stressed that, 
no matter how the reorganization turns out, Iceland will 
continue to uphold its NATO obligations.  When speaking of 
NATO commitments, the minister specifically stated that 
Iceland intends to take part in the Northern Viking exercise 
in 2010.  (Comment.  This information contradicts rumors we 
heard earlier that Iceland was considering postponing next 
year's Northern Viking exercise as a cost-saving measure. End 
comment.) 
 
¶7. (C) The Minister said that Iceland also remains committed 
to the effort in Afghanistan.  He said that, while he 
personally has concerns about the prospects for the war in 
Afghanistan, the Icelandic government understands its 
responsibility to contribute as a NATO member.  Iceland has 
no intention, he said, of completely withdrawing its 
personnel from Afghanistan and has never even discussed it as 
an option. 
 
¶8. (C) Noting the occasional activity of Russian planes in 
Iceland's air space, Skarphedinsson said he could not 
overstate the importance of the High North.  The Russians, he 
claimed, have specifically stated that the High North is a 
top strategic priority.  Skarphedinsson then, bluntly, used 
the High North discussion as an opportunity to chastise the 
U.S. for closing down the Keflavik Airbase in Iceland.  The 
decision, he said, was "a bloody mistake."  He noted that he 
understood the reasoning behind the decision and the need to 
reduce costs, but believes that the U.S. should have 
maintained some sort of presence in Iceland to protect its 
interests in the High North. 
 
EU Accession Process 
--------------------- 
¶9. (C) Regarding Iceland's bid to join the EU, 
Skarphedinnsson said that everything is progressing smoothly. 
 Iceland should have answers for the EU accession 
questionnaire by the EU's November 16 deadline. 
Skarphedinsson believes that this deadline was intentionally 
set to ensure that Iceland's candidacy cannot be evaluated at 
December's European Council summit.  Delaying consideration 
until spring would avoid the perception that Iceland's 
membership is fast-tracked at the expense of other 
candidates.  The most likely scenario, he opined, is that 
Iceland's membership application would be discussed at the 
March summit of the European Council and that accession 
negotiations will begin soon afterwards. 
WATSON