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FROM AMBASSADOR VAN VOORST

E.O. 12958: DECL: 05/18/2017
TAGS: PREL MARR PINR NATO KWMN ECON UNSC IC
SUBJECT: Scenesetter for the Secretary's visit to Iceland May 30, 2008

Classified By: Amb. Carol van Voorst for reasons 1.4 (b) and (d).


1. (U) The Icelanders are delighted to welcome you to the High
North. Your visit to Reykjavik is the first by a Secretary of State
since Secretary Powell attended the NATO Summit here in 2002, and the
first bilateral visit since Secretary Albright overnighted in 2000.
Under Secretary for Political Affairs Burns was the last senior State
official to visit in June of last year.


2. (SBU) In development and general prosperity, the Iceland you will
see bears little resemblance to that of the Cold War years, when the
country was struggling to emerge from a hardscrabble existence as one
of the poorest countries in Europe. Leveraged investments of fishing
profits and cheap, clean electricity translated into a booming
economy for most of the last fifteen years. Though the economy has
faltered in recent months as credit has dried up globally, life is
now very comfortable for the vast majority of Icelanders.


3. (C) The governing coalition of the Prime Minister's Independence
Party and the Foreign Minister's Social Democratic Alliance (SDA) is
strong and enjoys considerable public support, though a few fractures
are emerging as economic worries strain the partnership. So far, the
SDA has taken the biggest hit in public confidence, as they have
struggled to make the shift from opposition to government and have
lost a number of coalition policy battles. Disagreement over EU
membership may eventually drive the two parties apart, but most
likely not before the next scheduled elections in 2011.

FM Gisladottir: Atmospherics, topics
--------------


4. (C) Foreign Minister Gisladottir's meeting with you in April was
the last stop of an extremely heavy spring travel schedule. Both she

and PM Haarde have been criticized for spending too much time abroad
during a period of economic turmoil at home. She has focused more on
her role as SDA leader in the last few weeks, though she did find
time to visit the UK for consultations on development aid, to, lobby
for Iceland's UN Security Council bid, and to sign an MOU on defense
cooperation.


5. (C) Gisladottir is very appreciative of your visit and views it
as confirmation of her role as the proponent of a more
international-minded Iceland. Although her welcome will be warm and
sincere, Gisladottir is also under pressure from within and outside
of her party to show that she can hold her own at the table with the
U.S. She may feel she has to raise sensitive topics such as the
Guantanamo Bay detention facilities and renditions of terrorist
suspects, if only to be able to report she made the point.


6. (SBU) Women's Empowerment: Gisladottir will be keen to follow up
on your previous discussion of Iceland's proposal for a Women Leaders
Working Group.


7. (C) Middle East/Afghanistan: Gisladottir will be interested in a
readout of the ICI Conference in Stockholm and developments in Iraq,
as well as your sense of progress in the Israeli-Palestinian peace
process. She has a genuine desire to hear your thoughts on what role
small states such as Iceland can play in the peace process, and may
point to Palestinian Authority President Abbas' comments here last
month that perhaps Iceland could host a second "Reykjavik Summit,"
this time centered on peace in the Middle East.


8. (SBU) Defense and Security: The FM's focus here will be on
continuing her earlier conversation with you regarding NATO's
involvement in the High North and broader security issues in the
region, possibly foreshadowing the lunch conversation on Russia and
the North Atlantic neighborhood. Gisladottir may also want to brief
on Iceland's latest efforts in building robust defense and security
ties with neighboring NATO allies, including recent progress with the
UK. She is also likely to cover the bilateral security relationship,
and may raise the handover of the previously U.S.-run Iceland Air
Defense System (IADS) radar stations, on which DOD has the lead. We
are hoping to complete that transfer soon but may not be able to get
the price as low as Iceland wishes due to legal and regulatory
hurdles.


9. (C) UN Security Council Bid: We doubt that Gisladottir will
spend much time soliciting our vote for one of the two WEOG seats on
the Security Council this fall (NOTE: Iceland is running against
Austria and Turkey). Rather, she will go forward from the premise
that Iceland will be successful and will be looking for input on how

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Iceland might shape its term on the UNSC. Should Iceland win
election, it will hold the UNSC Presidency in February 2009, and
Gisladottir is exploring possible themes for Iceland's presidency,
while also trying to prepare for the potential staffing headache for
her small (250-person) foreign service.

Prime Minister Geir Haarde
--------------


10. (C) Warm, witty, and pragmatic, Prime Minister Haarde is at ease
in domestic and international settings. Since you met him in
Washington in October 2006 to sign the bilateral Joint Understanding,
Haarde has only become more comfortable in the role of Head of
Government. Haarde spent much of the first half of this year on
trips abroad, serving as the country's head cheerleader for
international audiences and protesting what he sees as the financial
media's tendency to gang up on Iceland. Beyond economic pep talks,
he also found time for bilateral visits with his Canadian and British
counterparts in March and April, and in both places revitalized talks
on defense and security cooperation that had become mired in the
bureaucracy. He was most recently in the U.S. in April for
anniversary celebrations of the international students program at
Brandeis, his undergraduate alma mater.


11. (C) You will find Haarde assured and affable, though possibly
defensive on the issue of media carping and the influence of foreign
speculators on the strength of the Icelandic currency. You may see a
slight awkwardness in the interplay between Haarde and FM Gisladottir
should the topic of EU membership come up; Gisladottir makes no
secret of her view that Iceland should join, while Haarde and his
party are opposed. On virtually all other points, however, the two
leaders have put themselves firmly in sync, and in their year as
coalition partners have skillfully presented a unified front on most
international issues while ignoring the squabbling of their parties'
respective fringe elements. Haarde has given Gisladottir a free hand
to reorganize the Defense Department, housed within the MFA, and
supported her as she pushed through Iceland's first defense budget.
While Haarde will defer to Gisladottir as your formal host, he is
certain to make his own points to underline the central importance of
the U.S. and NATO to Iceland's security.

PM/FM Working Lunch Topics: Russia, Global Economy
-------------- --------------


12. (C) Over lunch with PM Haarde and FM Gisladottir, we anticipate
a wider scope to the discussion, focusing on issues of global
concern. In particular, Iceland is keeping a close eye on
developments in Russia, and the chattering classes here swing from
criticism of U.S. "provocations" of the Russians to deep concerns
over the increasingly assertive Russian foreign policy. This topic
would provide an ideal opportunity to follow up on the NATO Bucharest
Summit and the issue of MAP for Georgia and Ukraine -- Iceland
supported MAP for both, but did not want to appear too far out in
front. Further afield, both Haarde and Gisladottir would be
interested in your views on developments in East Asia -- particularly
China -- and in Africa, two areas where Iceland is constructing new
business or development ties.


13. (U) Haarde and Gisladottir may also want to briefly cover
economic issues, both to talk up the Icelandic economy and to explore
developments in the U.S. and global economy that have a bearing on
Iceland's highly leveraged financial sector. Haarde, who as Finance
Minister oversaw much of Iceland's startling economic transition, is
particularly interested in reassuring the U.S. concerning Iceland's
creditworthiness.


14. (C) Whaling will be in the news again shortly before your
arrival, as the government issued a new quota for commercial hunting
of minke whales on May 19. While Gisladottir and her fellow SDA
ministers believe whaling harms Iceland's image abroad and serves no
real domestic interest, Haarde's party controls the issue and the PM
is a firm defender of what he sees as Iceland's sovereign right to
manage its own marine resources.

van Voorst