Foreign Minister Expected to Ask the Secretary for

C O N F I D E N T I A L REYKJAVIK 000240 SIPDIS STATE FOR EUR/NB E.O. 12958: DECL: 10/20/2018 TAGS: EFIN ECON PGOV IC SUBJECT: Foreign Minister Expected to Ask the Secretary for Financial Assistance Classified by: Ambassador Carol van Voorst for reasons 1.4 (b) and (d). ¶1. (C) MFA Permanent Secretary Gretar Mar Sigurdsson, the acting chief of the MFA during Foreign Minister Gisladottir's extended absence, informed the Ambassador October 17 that Gisladottir intends to play a leading role in the government's efforts to secure international financing after she returns to Iceland October 20. The Minister plans to call the Secretary this week to request that the U.S. consider contributing to the estimated ten billion dollars in foreign loans that Iceland requires to get through the current financial crisis. ¶2. (C) Sigurdsson acknowledged that the four-week absence of the Foreign Minister (who is also the head of the junior coalition partner) has resulted in organizational and leadership problems among the various ministries and agencies involved in managing the financial crisis. Sigurdsson's own serious illness has further hampered MFA efforts to stay on top of rapidly changing developments. Gisladottir, however, has the political and popular clout to help the Prime Minister define and steer the country towards the best possible outcome for its citizens. Sigurdsson added that she is determined that the present government coalition of her Social Democratic Alliance and the Prime Minister's Independence Party will survive the present difficulties. ¶3. (C) Sigurdsson said the government is uncomfortable with the prospect of a large loan from Russia and wants to avoid the dependency that such a financial obligation would necessarily entail. Iceland would prefer to reduce its obligation to Russia by relying on a basket of loans from a mix of lending countries. So far, the Japanese have indicated a willingness to be generous, and the Chinese have also suggested they might contribute. The MFA would like the U.S. and Germany to make significant contributions. The MFA's plan is for Gi#zn*Q|Qspite the outpouring of horrifyingly bad news for Icelandic citizens, the government has demonstrated a puzzling lack of urgency, combined with a reluctance to reach out to those non-Nordics who might possibly be in a position to help. Without pressure from this Embassy, for instance, the Finance Minister would not even have asked to meet with Treasury officials during his recent visit to Washington. Part of this may be the sheer difficulty in collecting information from the financial institutions here and overseas; part of it may be the hesitancy to show foreigners how bad the financial situation is; part may be inter-governmental and political squabbles within the coalition partners, and between departments and David Oddson's Central Bank. The virtual decapitation of the MFA during this period is certainly one reason for the appearance of hapless stumbling, and Gisladottir's absence from Alliance Party and coalition counsels was definitely felt. The news that she is prepared to exert her usual authority and add a decisive and capable executive to the government's small and over-stretched body of decision-makers is good news for her country and for our relationship. ¶6. (C) Embassy Comment continued: Gisladottir returned on October 18 and attended a well-publicized party meeting the following day. Sources close to her say, though, that the operation in New York to remove a brain tumor was more serious than the public is aware, and that she faces a long and difficult convalescence. She announced yesterday that she will undergo a follow-up operation in the near future in Iceland. We have heard privately that she may then require chemotherapy. Although this astute, powerful, and decisive leader obviously wants to be engaged as the government maps its way out of this crisis, it is unclear how active a role her health will permit her to play. End comment. van Voorst