ICELANDIC INTERIM MINISTER OF FINANCE AND FISHERIES

C O N F I D E N T I A L SECTION 01 OF 02 REYKJAVIK 000068

SIPDIS

State for EUR/NB and OES/OA
Commerce for NMFS WHogarth
Treasury for Eric Meyer and Larry Norton

E.O. 12958: DECL: 04/06/2019
TAGS: ECON EFIN SENV EFIS PGOV IC
SUBJECT: ICELANDIC INTERIM MINISTER OF FINANCE AND FISHERIES
CONFIDENT ON IMF PROGRESS AND ICESAVE NEGOTIATIONS

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


1. (C) Summary: During the Ambassador's farewell call, a tired
looking and clearly over-worked Steingrimur J. Sigfusson was
confident about the upcoming elections, happy with the progress with
the IMF, and encouraged by Iceland's negotiating position with the
IceSave accounts. Sigfusson's roles as Minister of Finance, Minister
of Fisheries and Agriculture, Deputy Prime Minister, and Leader of
the Left Green Party generated an expansive and wide ranging
conversation. If his party participates in the new government,
Sigfusson said that progress with IMF will continue on the new Letter
of Intent, Iceland will press harder for favorable loan terms from
the U.K. and the Netherlands on IceSave, and the commercial whaling
quotas will be reduced in the future. Sigfusson also said he was
considering seeking bilateral loans from the U.S. and Canada (the
Ambassador explained why he should not look to the U.S.) and believes
that Iceland is unlikely to seek E.U. membership any time soon. End
Summary.


2. (C) During the April 7 office call, Sigfusson confessed to the
Ambassador that he is extremely busy in his multiple roles of
Minister of Finance, Minister of Fisheries and Agriculture, Head of
the Left Green Party and Deputy Prime Minister. He said that he
would be surprised if there were any big changes in the polls in the
last few weeks before elections, and barring some significant event,
he expected the interim government to return to office.


3. (C) Sigfusson admitted that he was never a proponent of an
International Monetary Fund (IMF) loan for Iceland and felt that a
better option would have been to seek a Nordic-EFTA package of loans.
Sigfusson said he put a lot of work into that idea in November
(while he was in opposition) but was stymied by the former
government. He commented that a recent rise in public sentiment to
abandon the IMF obligations is being fueled "by the news from
Latvia." However, as a minister, he recognized that it is very
important that the IMF program continue and he emphasized that the
IMF representatives he has met have been professional and helpful.
He said work was being finalized now with IMF in Washington on a new
agreement to be completed soon after Easter, which will then be
presented to the IMF Board for consideration. Sigfusson said Iceland
has missed the annual meeting deadline but hopes the board will meet
in early May.


4. (C) On IceSave, Sigfusson felt the recent U.K. Parliamentary
report which criticized the U.K. government use of terrorism finance
laws against Iceland and Icelandic banks in October 2008 puts Iceland
in a stronger negotiating position. Sigfusson said the report was
harsh, and to his mind depicts Chancellor of the Exchequer Alistair
Darling as lying about why the terrorism act had to be invoked.
Sigfusson cited the recent meeting between Foreign Minister Ossur
Skarphedinsson and British Secretary David Miliband and his own
recent correspondence with Dutch authorities as helpful in keeping
communications open. He said that the Icelanders are also giving the
U.K. and the Netherlands updated information on the overall debt
situation, which looks worse than it did in October/November. He
said at that time the IMF predicted debt as 160 to 170 percent of
GDP, but those figures have now been revised to 200 to 225 percent of
GDP. Sigfusson said the Icelandic people "are prepared to honor
their obligations," but to pay for the aggressive and speculative
"behavior abroad is unjust and unfair." Sigufsson stressed that the
terms of the loans to cover the IceSave minimum deposits are
essential -- it's very important that Iceland receive low rates with
a long grace period.


5. (C) On whaling, Sigfusson reiterated that his hands were legally
tied by the decision of his predecessor and that he has made it known
that if the interim government returns after the election, it will
work to undo future commercial whaling. Sigfusson confirmed he had
received the letter from Whole Foods grocery store, warning that it
will find substitutes for Icelandic products if whaling continues,
but did not seem to take it seriously. He admitted that he had
received a stack of similar letters but hadn't read them all. The
impression he left was that he is looking forward to handing the
Fisheries portfolio to someone else in the next government.


6. (C) Sigfusson said he wants greater cooperation with the U.S. He
especially wants to talk with the U.S. and Canadian governments about
bilateral loans to Iceland. The Ambassador clarified the lack of a
mechanism or legislative authority in the U.S. for such loans to
advanced nations. He commented that the loan Russia promised would
probably not happen because the Russians have not shown much real
interest and are seeking additional information from Iceland.
Sigfusson, who is an opponent of joining the E.U., gamed out for us
that regardless of who wins the parliamentary elections, the Althingi
is likely to be largely anti-Icelandic accession to the E.U. He

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remarked that the Independence Party copied his party's platform and
they too are not pro-EU but would let the public decide the issue in
a public referendum if it came to that stage. He thinks EU accession
is doubtful in the near future.


van Voorst