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