C O N F I D E N T I A L SECTION 01 OF 04 REYKJAVIK 000121

SIPDIS

DEPT FOR EUR/NB, EUR/RPM
OSLO FOR DATT
OSD FOR OSD-P (FENTON)
EUCOM FOR J-5, JTRE (CROSSEN)
NORTHCOM FOR PLANS, POLICY & STRATEGY (CARDWELL)
NSC FOR HOVENIER

E.O. 12958: DECL ON: 07/01/2019
TAGS: PREL MARR MOPS PGOV NATO AF IC
SUBJECT: U.S.-Iceland Security Dialogue: Icelandic Defense Policy
Still in Flux

Classified by CDA Neil Klopfenstein for reasons 1.4 (b),(d).

REFS: A) 08 STATE 63686


1. (C) Summary: Expert-level Security Dialogue talks in Reykjavik
June 16 found broad agreement on the bilateral defense relationship.
Both sides agree on the importance of a new NATO Strategic Concept,
which Iceland hopes will contain language on the significance of the
High North. Iceland reiterated its commitment to meeting its NATO
obligations at home and in Afghanistan despite budget cuts and an
ongoing review of defense policy. Iceland Air Defense System radar
transfer issues will be reviewed in FY10, and reestablishing a data
link to NORAD/NORTHCOM is under discussion. Both sides agreed to
move to a biannual schedule for NORTHERN VIKING exercises. Iceland
was urged to look at niche capabilities where it might contribute in
Afghanistan. The next round of talks in 2010 is planned for
Washington. End Summary.

NATO and the High North
--------------


2. (C) Icelandic and U.S. representatives met June 16 in Reykjavik
for annual working-level Security Dialogue talks. In her opening
remarks, Ministry for Foreign Affairs Political Director Greta
Gunnarsdottir, the Icelandic Delegation Head, said Iceland wanted to
ensure that the security agenda between the U.S. and Iceland stayed
robust, and noted that the meeting's planned discussion was a good
reflection of this effort. Turning to NATO issues and High North
policy, the first agenda item, Gunnarsdottir said Iceland was very
pleased with the Strasbourg-Kehl Summit and its success in
reaffirming the strength of the Alliance. She said the decision to
revisit the Strategic Concept was a key outcome for Iceland. DAS
Garber agreed, noting several additional important results from the

U.S. perspective: Allies' endorsement of the new Afghanistan
strategy; a reconfirmed sense of family and common values among the
Alliance; the return of France to the military command; the accession
of Albania and Croatia and the message that NATO's door remains open;
and the consensus built on a transatlantic approach to Russia ahead
of the upcoming NATO-Russia Council meeting.


3. (C) Looking specifically to the High North, Foreign Affairs
Advisor to the Icelandic Prime Minister Amb. Sturla Sigurjonsson said
that Iceland was pleased to see a new Secretary-General coming from
the Nordics. Though both the SecGen and the new Strategic Concept
need to reflect the needs of all Alliance members, it is important
that the new document contain some language on the High North as an
area of interest to NATO. Gunnarsdottir built on this assessment,
reviewing recent Icelandic Government efforts to draw attention to
the region. Beginning with the NATO Seminar on the High North in
Reykjavik in January 2009 and a government report from April on
Iceland in the Arctic, Iceland has tried to highlight the policy
challenges stemming from climate change and increased resource
exploitation in the area. Iceland still wants to see the Arctic
Council remain the primary venue for Arctic issues, but NATO must
also play a role. Gunnarsdottir also asked about plans for U.S.
ratification of the UN Convention on the Law of the Sea (UNCLOS),
which Iceland considers very important.


4. (C) DAS Garber commented that the U.S. and Icelandic approaches
to the High North are very much in line with each other. As for
UNCLOS ratification, the Administration is in favor but there is not
yet progress in the Senate on ratification. Sigurjonsson added that
Iceland is not looking for increased militarization of the High
North, but wants to increase NATO "situational awareness" of what is
going on in the region. This is important to maintain Alliance focus
as well as public support.


5. (C) Gunnarsdottir opened discussion of the NATO Strategic Concept
by stating Iceland's hope that the exercise will prioritize tasks for
the Alliance as well as recommit Allies to the NATO mission. The
process of drafting the document can also be an important rallying
point to reenergize public support. However, she noted, it is
important to reiterate the importance of Article 5 and strike a
balance between the traditional NATO Area of Responsibility and
out-of-area operations. In this vein, smaller Allies' concerns about
the process need to be addressed -- there needs to be common
ownership of the final document, even if only a restricted group is

REYKJAVIK 00000121 002 OF 004


involved in the drafting. Garber agreed that the drafting process
will be very important in building support for the final document,
but reiterated that the SecGen needs to own the process. We have
said we want the drafting effort to be as consultative as possible
early on, but we have concerns that a document drafted "at 28" will
not truly be a Strategic Concept.

Russia
--------------


6. (C) On Russia, both sides observed that Russian engagement is
often uneven, and that while dialogue in the NATO Russia Council is
important, it is equally important for Allies to remain united. It
was noted that the Russians are very skillful at exploiting political
divisions within the EU and NATO, and it is therefore critical for us
to hold to our key principles on the indivisibility of security and
the rejection of spheres of influence. Sigurjonsson said Iceland
does not want to exaggerate the importance of increased Russian
military activity near Iceland, including new, more provocative
flight patterns, but it is important that NATO respond and maintain
its capabilities accordingly. DAS Garber commented that the US
position is that the current European security institutions are
working well, and that in Corfu and beyond we will not be looking to
replace the current architecture. Gunnarsdottir concurred, though
adding that in bilateral consultations with Russia the previous day,
Icelandic officials heard clearly that Russia does not believe the
present security structure meets its needs. Still, Russian officials
have been less than forthcoming on details for their proposals of a
new European security institution, almost as if they have been
waiting for the rest of Europe to give them something substantive in
response. LtCol Anne Marie Fenton, OSD-Policy, noted that it is
important for Iceland to try to move the Russians in a productive
direction, which DAS Garber seconded. (Note: Meeting participants
were informed later in the meeting that Russian Tu-95 bomber aircraft
had just entered the Icelandic air traffic control sector on an
unannounced long range aviation exercise. End Note.)

Icelandic Defense Policy: Under Review
--------------


7. (C) MFA Defense Department Director Thordur Aegir Oskarsson and
Iceland Defense Agency (IDA) Director Tinna Vidisdottir provided an
overview of Icelandic defense policy with a significant major caveat:
the new government that took office after the April elections has
called for a review of IDA operations and the NATO air surveillance
mission in Iceland. Despite the fact that much is still undecided --
and added pressure of state budgetary cuts required by Iceland's
economic crisis -- the Foreign Minister has committed to fulfilling
Iceland's defense and security obligations. Simultaneously, the
government plans to carry out a policy-based review of the report
produced by an MFA-appointed Threat Assessment Committee in 2008.
While the previous report was descriptive in nature, this effort will
be focused on policy prescriptions in an effort to prepare the ground
for the upcoming budget, Oskarsson said. While acknowledging the
uncertainty of Iceland's situation, the U.S. side noted the
importance of the government maintaining its commitments to NATO,
both in Iceland and further afield. In particular, maintenance and
operation of NATO assets is key to retain the Alliance's capability
to deploy to Iceland.


8. (C) Discussion of Iceland's cooperation with neighboring states
focused primarily on the report commissioned by the Nordic Foreign
Ministers on defense and security cooperation, known generally as the
"Stoltenberg Report" after its author, former Norwegian Foreign and
Defense Minister Thorvald Stoltenberg. Gunnarsdottir said the report
had been very well-received and contained a number of good
recommendations, though it also covered many areas in which the
Nordic countries are already working well together. It is important
to carefully map out those areas to avoid duplication of existing
efforts. Iceland was particularly impressed by the report's
statements on the importance of the Arctic, the idea of joint Nordic
diplomatic missions abroad, and the suggestion that Nordic countries
(including non-NATO states) participate in the air surveillance
mission over Iceland as well as the U.S.-Iceland NORTHERN VIKING
exercises. Sigurjonsson was careful to clarify that the Icelandic
Government views the suggestions in the report as a supplement to
Iceland's activities with NATO, not as a replacement. DAS Garber

REYKJAVIK 00000121 003 OF 004


noted U.S. support for the idea of closer security cooperation among
the Nordics, particularly if it provides a boost to efforts to cut
costs and improve military capabilities in the region.

Bilateral Initiatives: IADS, Exercises, Coast Guard
--------------


9. (C) A review of specific activities in bilateral defense
cooperation focused on the status of the Iceland Air Defense System
(IADS), planning for exercise and defense events for 2009-2013, the
status of the Military Representative Billet at U.S. Embassy
Reykjavik, and the relationship between the Icelandic and U.S. Coast
Guards. On IADS, both parties agreed that due to the Icelandic
financial situation, action on the final transfer of U.S.-owned
equipment will be deferred until Fiscal Year 2010. Although no
political decision has been taken on upgrades, Iceland's NATO Mission
in Brussels is exploring the technical issues related to possible
NATO-funded upgrades in 2011-2015 as part of Alliance adoption of a
next-generation radar system. Iceland is also very interested in
reestablishing the data link between IADS and U.S. NORTHCOM/NORAD,
which Iceland Defense Agency reps and a representative of NORTHCOM
discussed on the margins. Some operator-level discussions on this
point have already taken place.


10. (C) IDA Head of Strategic Planning Fridrik Jonsson thanked the
U.S. for a successful September 2008 deployment of fighter aircraft
for NATO air policing in Iceland. Iceland is also happy to hear that
the U.S. has committed forces for a planned 2010 rotation. On
NORTHERN VIKING exercises, there was agreement from both sides to
shift from the annual schedule laid out in the 2006 Joint
Understanding to a biannual schedule, with 2009 as an off year. U.S.
EUCOM Joint Training Readiness and Exercises Representative LTC Bill
Crossen outlined a proposed five-year plan for defense engagements,
with two events planned per year in addition to scheduled air
policing deployments in odd years. Exercise NORTHERN VIKING will be
held in 2010 and 2012, and beginning in 2011 U.S. Army Europe will
also look to participate in the Icelandic Coast Guard's NATO NORTHERN
CHALLENGE explosive ordnance disposal (EOD) exercise. Both sides
agreed that the Stoltenberg Report's suggestion of Nordic
participation in NORTHERN VIKING and/or the air patrolling mission
would be a positive addition.


11. (C) On the MilRep position at Embassy Reykjavik, OSD-Policy
Representative LtCol Fenton reviewed CDR EUCOM General Craddock's
decision to support the creation of a permanent billet, but noted
that the modalities are still being worked out. In the interim,
EUCOM will fill the position in FY10 with an activated reservist.
Icelandic Coast Guard (ICG) Director Georg Larusson then briefed on
moves to boost ICG capabilities, including the acquisition of a new
fixed-wing aircraft and patrol vessel as well as Iceland's
chairmanship of the North Atlantic Coast Guard Forum (NACGF).
Iceland will host the NACGF Plenary in Akureyri in September 2009,
where Norway will take over as Chair. Both sides voiced support for
continued exchange, building on the ICG-USCG Memorandum of
Understanding from 2008, though Larusson cautioned that the ICG is
under tremendous financial pressure and may need to adjust
participation accordingly.

Global Issues: Financial Crisis, Afghanistan-Pakistan
--------------


12. (C) The MFA provided a briefing on the Icelandic economic
situation and the government's response to the financial crisis, with
a particular focus on the recently-negotiated agreement on deposit
guarantees for the Icelandic-owned Icesave banks in Britain and the
Netherlands. Of note, Chief Negotiator for Trade Agreements Einar
Gunnarsson estimated that the sales of other bank assets would, even
by conservative estimates, cover a large portion of the guarantees,
possibly as much as 75 percent. Additionally, Gunnarsson described
the government's hope that a way forward can be found in dealing with
the creditors of the failed Icelandic banks so that they are awarded
an ownership share in the new banks or some other means of
profit-sharing in the future.


13. (C) Both delegations agreed on the importance of success in
implementing NATO's Afghanistan strategy, and Gunnarsdottir
emphasized that despite budget cuts, Iceland does not intend to drop

REYKJAVIK 00000121 004 OF 004


its level of support for the ISAF mission. Garber welcomed this
statement, and Fenton noted that the Icelandic Coast Guard's EOD
expertise would provide a great potential contribution to needs in
Afghanistan. Additionally, better civil-military integration is
necessary, and Garber and Fenton urged Iceland to look at ways to
assist in this regard in areas where Iceland may have niche
capabilities. Garber welcomed the Icelandic delegation's interest in
possible Afghanistan-specific consultations. In response to a
question on public support for the Afghan mission, Gunnarsdottir
noted that the Icelandic public has largely turned inward following
the economic collapse. Support for foreign involvement in general
has dropped, not just in Afghanistan. That said, the Left-Green
Movement, formerly the party most opposed to Iceland's contribution
to NATO in Afghanistan, has mitigated its comments since coming into
government in February.


14. (SBU) The two delegations agreed to hold the next round of
expert-level talks in Washington, D.C., though the Icelandic side
also urged that planning begin for a coming round of senior-level
talks.


15. (U) Meeting Participants:

U.S.:
--EUR DAS Judy Garber, Head of Delegation
--LtCol Anne Marie Fenton, USAF, Office of the Under Secretary of
Defense for Policy
--Stephen Wheeler, Iceland Desk Officer, EUR/NB
--LTC Bill Crossen, USA, U.S. EUCOM Joint Training Readiness Exercises
--Capt Brian Driggers, USAF, Iceland Desk Officer, EUCOM J-5
--Barry Cardwell, Deputy Chief, Strategy and Policy Division, Plans,
Policy and Strategy Directorate, U.S. NORTHCOM/NORAD
--Neil Klopfenstein, Charge d'Affaires, Embassy Reykjavik
--Brad Evans, A/DCM, Political Officer, Embassy Reykjavik
--CDR Patrick Geraghty, USN, Military Representative and Assistant to
the Defense Attache, Embassy Reykjavik

Iceland:
--Amb. Greta Gunnarsdottir, Ministry for Foreign Affairs Director
General for International and Security Affairs
--Amb. Thordur Aegir Oskarsson, Director, MFA Department of Defense
--Amb. Sturla Sigurjonsson, Foreign Affairs Advisor to the Prime
Minister
--Thorunn Hafstein, Ministry of Justice Acting Permanent Secretary
--Ellisif Tinna Vidisdottir, Director, Iceland Defense Agency
--Fridrik Jonsson, IDA Head of Strategic Planning and Exercises
Section
--Jon Gudnason, IDA Air Command and Control Manager
--Georg Larusson, Director General, Icelandic Coast Guard
--Harald Johannessen, National Commissioner of Police
--Ingibjorg Rafnar Petursdottir, Desk Officer, MFA Department of
Defense



Klopfenstein