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Ministry for Foreign Affairs

Address by the Minister for Foreign Affairs, David Oddsson, on foreign affairs to the Althing


Address by the Minister for Foreign Affairs

Davíð Oddsson

on foreign affairs to the Althing

Delivered in the Althing at its 131st legislative session, 2004-2005

Ministry for Foreign Affairs
April 2005




The first day of April this year marked the 150th anniversary of the day on which Icelanders gained the right to trade freely. President of the Althing Jón Sigurðsson and his supporters understood the importance of free trade for Icelandic society. In their opinion, freedom to trade marked the start of better times.  Jón Sigurðsson said: “Nations can only know themselves fully if they also know other nations, pay close attention to their cultures and development and learn from their experiences, both as regards what should be emulated and avoided.” He also said: “Also, our education has stood at its highest point when travels were at their peak and Icelanders engaged most extensively in trade with other countries, not one country but many”. As usual, Jón Sigurðsson hit the nail on the head.


I believe that it is appropriate on this occasion that I should begin my report by discussing foreign trade.


In recent years measured steps have been taken to free the Icelandic economy from the fetters of restrictions and government interference. Taxes have been cut and allocations to research and development have been increased, resulting in a higher level of education in the country. International surveys regularly rank Iceland among the foremost countries in terms of favourable business environment. This is cause for great satisfaction.


Strong pension funds and the privatisation of the banks, together with the increased freed trade have created opportunities for the cross-border expansion of Icelandic enterprises. The fishing industry has been placed on a firm foundation. On the basis of our quota system, fish is now harvested and sold in accordance with market supply and demand, resulting in greater value for our catches. Reductions in catches have a less decisive impact than before, as stability has replaced chaos.


All of these factors, together with a number of other factors, have played an important role in setting the stage for Icelandic cross-border expansion. Productivity has increased and a greater variety of jobs has been created in the country, in software, pharmaceuticals, financial markets and biotechnology, to name only a few sectors. At the same time, the unemployment rate is among the lowest in the world. The cross-border expansion of Icelandic enterprises therefore rests on a firm foundation, with the business climate in this country among the best in the world.


Concurrently with the measures within the country, propitious steps have also been taken in foreign trade. The decision to participate in the European Economic Area proved an auspicious one. Within the Economic Area, we enjoy terms of trade which are to a large extent the same as the terms of trade of 27 other European countries with a market of over 500 million people.  The Agreement rests on a firm foundation. This was clearly revealed in the latest enlargement of the Economic Area. The Member States showed in practice that they support the Agreement, which will continue to serve as a firm basis for Icelandic relations and trade with Europe.


European affairs are currently being discussed in a committee appointed by the Prime Minister last year, where all the political parties in parliament are represented. The Committee is intended to identify the principal issues and facts in order to promote discussions of European Affairs based on well founded premises.


But the horizon of Icelandic trade extends beyond Europe. Our participation in the European Free Trade Association – EFTA – has brought us success, with the EFTA states concluding free trade agreements with 14 countries outside Europe. Negotiations are currently in progress with South Africa and other countries in that region. Free-trade negotiations with South Korea are progressing well and discussions with Thailand are scheduled to begin in Reykjavik next May. Informal discussions have been held with various other countries, including the United States and China, but concluding an agreement with Canada has proven difficult. It should come as no surprise that it is often the larger countries that have requested free-trade agreements with the EFTA states, which jointly account for 2% of world trade, equivalent to that of Mexico, with its population of 100 million people.


The EFTA states have increasingly sought free trade with Asian states. Previously, they have usually followed in the footsteps of the European Union in concluding free-trade agreements, but this is not the case in Asia, where the EU has no free-trade agreements. It is by no means self-evident, in fact, that the interests of the EFTA states and the Member States of the EU will invariably go together. Free trade between Iceland and China is being proposed in 2007, and a Memorandum of Understanding concerning negotiations is currently in preparation. An investment agreement is already in place between the two countries, an agreement on tourism was concluded last year, and recently Iceland and China signed one of the most extensive air transport agreements ever entered into by Iceland.


As regards our most immediate neighbourhood, we feel a special affinity for our kinsmen in the Faeroe Islands. It is therefore a matter of special satisfaction that in the near future a free trade agreement will be signed between Iceland and the Faeroes, the most extensive agreement of its kind ever made by Iceland. It covers agricultural products, and under the agreement Icelanders and the Faeroese will enjoy equal business terms in each others’ countries. The goal is that Greenland should accede to the agreement in the near future.


But although bilateral regional trade co-operation is important, promoting international trade co-operation is also a key issue. Free trade is the route to improved living standards for everyone. The impact of the results of the WTO Doha round of negotiations will be felt around the world. Trade barriers will be removed, tariffs on industrial products will be reduced and more transparent rules will be established for world trade, which will benefit small states in particular. The Icelandic government has strongly emphasised the importance of abolishing disruptive state subsidies to fisheries, and the opposition of various countries in this regard has now waned.


The trade in services is the fastest growing sector of international trade, and it is important to achieve results in this sector.  It is also clear that the results of the current round of negotiations will substantially increase cross-border trade in agricultural products. It may be assumed that export subsidies will be abolished, market incentives in the form of state aid and tariffs will be reduced and market access will be improved. Nevertheless, it will be important for the Doha Round to take account of the special and vulnerable position of agriculture in marginal regions. In this respect, Iceland has the same view as many other countries. It is foreseeable that if the Doha Round is concluded as scheduled at the end of next year, this will have an impact on state support for Icelandic agriculture.


Globalisation has had an extensive impact on the work of the Foreign Service, which in recent months and years has been restructuring itself and adapting its services to the needs of business. Part of this restructuring involved substantially increasing co-operation with the Icelandic Export Council, to the great appreciation of Icelandic enterprises. Following these changes, Icelandic enterprises can now take advantage of the Ministry’s network of embassies and commercial representatives in a more efficient and effective way than before.


Tourism is steadily on the rise, accounting for about 15% of Iceland’s foreign revenues. Numerous government entities, such as the Foreign Service, the Export Council and the Iceland Tourist Board, are involved in promoting Iceland. The view of the parties involved in these affairs is that it would be a reasonable step to increase both co-operation and co-ordination in marketing and promotion in order to make the best possible use of the human and financial resources allocated to these issues. The purpose of establishing a separate tourist office and trade service in the Foreign Ministry at the turn of the year was to give greater weight to these issues, which will result in improved services to Icelandic enterprises, particularly those involved in tourism.



Mr. Speaker


Iceland’s aid to developing countries is increasing and has become a prominent aspect of Icelandic foreign policy. Iceland’s contribution to development co-operation this year will correspond to approximately 0.20% of GDP, as compared to the OECD average of 0.25%. The goal is for Icelandic aid to reach 0.35% of GDP in 2009. Based on this proportion and the GDP for 2004, development aid would then amount to three billion krónur.  The increased aid will be allocated as outlined in a separate report which has been submitted to the Althing.


The Icelandic International Development Agency (ICEIDA) is currently preparing to provide assistance to two new partner states, Sri Lanka and Nicaragua, in addition to the four African countries where the Agency is already engaged. Development aid is also channelled into numerous other important projects, including the United Nations Children’s Fund and the UN Development Fund for Women (UNIFEM), in addition to contributions to the World Food Programme. Iceland will also support UN development work by sending young experts to work for the organisation in developing countries in an initiative specifically designed to promote interest in development work among young people. In addition, Iceland’s participation in the co-operation of the World Bank and other international organisation with developing countries in fisheries has already been increased, and Iceland’s relations with small island developing states have been strengthened through our own separate trust fund.


In our development work in southern Africa in recent years it has proven necessary, in order for the aid to return better results, to set up diplomatic missions in Uganda, Malawi, Mozambique and Namibia. Iceland has posted an ambassador in this region based in Mozambique. For practical reasons, the embassy will be moved to South Africa at the turn of the year.


It is a matter for concern, looking at the political and economic developments in the world in recent decades, that the countries in Sub-Saharan Africa in general have stagnated or even regressed in spite of massive development aid. In 1990, 227 million Africans survived on less than one dollar a day, but it is projected that this figure will reach 340 million by 2015 if there is no change. There are various reason for this situation, and fortunately there is some hope of improvement, but it is clear that poor governance has been the cause of extensive damage. It is, for example, incredible, that Zimbabwe, once among the wealthiest countries in Southern Africa, is now among the poorer nations in the region as a result of tyranny and corruption. It is the responsibility of the developing countries to bring about democratic reforms and secure human rights, which are the prerequisites of improved government. At the same time it is the duty of the industrial countries to support all efforts in this direction in the developing countries.  To do anything else would not only be a waste of the funds allocated to development, but also a betrayal of the people who live in the developing countries. Governance is among the factors taken into account by the Icelandic government in its decisions to enter into development partnerships.


The establishment of the African Union reflects the desire of the African states to address the issues of their own continent, and the work of the African Union Mission in the Darfur Region of the Sudan will be its first trial. In addition, the implementation of the cease-fire agreement with the rebels in southern Sudan could provide a guide to the end of the hostilities in Darfur. In this hope, the Icelandic government has pledged a contribution of ISK 65 million to the reconstruction work in the Sudan. It is still too early for any predictions of success, but while the community of nations is deliberating what to do, the mass murders, rapes and ravaging continues in Darfur and millions of people are fleeing. At the same time, the Sudan has a seat on the United Nations Human Rights Commission, joining Zimbabwe, in fact, and a number of other countries where human rights are held in total disregard.


Sudan lies, geographically and culturally, on the boundary of southern Africa and the Middle East, and the country epitomises the principal problems of both regions. As  in various countries in Africa, poor governance is a brake on economic and social progress in most of the countries of the Middle East. Unlike many other places in the world, the number of people under the poverty line is growing. UN Human Development Reports have confirmed that the reasons are primarily the result of poor governance and social structure.


Democratic and efficient government is therefore the key to progress and security in the Middle East. The successful elections held in Iraq last January and their undeniable catalyzing effect on neighbouring countries is therefore a matter of great satisfaction.  The impact has been particularly visible in the Lebanon in recent weeks. It is sometimes implied that the populations of the Middle East have no desire for western-style democracy. This is absurd and reflects a prejudice which can only serve the purposes of reactionary forces. The insistence of western states that democracy must be entrenched and human rights assured in this region has certainly struck a chord among the people of these countries in recent times. 


Two years have now passed since the invasion of Iraq, and although the political reforms have been more successful than many people dared to hope, the reconstruction work has been less swift. This is due almost exclusively to terrorist attacks. It is therefore both politically and economically imperative that the Iraqis should be rendered capable of preserving their own security. It is in fact the prerequisite for reconstruction and the eventual withdrawal of the Coalition forces. The Icelandic government has for this reason decided to contribute to the training of Iraqi security forces by NATO in Iraq.


In the Middle East it has come to light, as predicted by so many people, that the decease of Yassir Arafat opened new opportunities for the resolution of the dispute between the Palestinians and the Israelis, since for years he was an obstacle to peace. The Palestinians have held presidential elections and formed a competent government, and in Israel a new coalition government has taken over, which has decided to withdraw Israeli forces and settlers from the Gaza Strip. Both steps give cause for cautious optimism, but it is clear that extremist forces will continue to try to fan the flames of conflict.  It is now more important than ever before for the Palestinian government to continue to promote peace by preventing terrorist attacks on Israel. At the same time, the Israeli government must honour its commitments under the Roadmap to peace as regards the settlements on the West Bank.


In Afghanistan, the government in Kabul has successfully managed to strengthen its position, with democratic parliamentary elections scheduled for the coming autumn. This is happening in tandem with the growing activities of the NATO International Security Assistance Force (ISAF), and the Provincial Reconstruction Teams across the country.  When the last members of the Icelandic Crisis Response Unit leave the International Airport in Kabul in just over a month’s time, Iceland will begin its participation in the Provincial Reconstruction Teams in northern Afghanistan, together with Norway and Finland, and in western Afghanistan, with Lithuania, Latvia and Denmark. Iceland’s contribution in each area will take the form of two specially equipped off-road vehicles and a crew of 8-9 people. In this way, Iceland will become a participant in the organisation and implementation of the reconstruction work in Afghanistan. Among other things, members of the reconstruction teams will travel around, survey the situation in urban and rural areas and submit proposals for improvements to the appropriate aid and other international organisations.  In the areas where the Icelandic peacekeepers will be operating communications are extremely difficult, and Icelandic experience should therefore prove useful. I would like to mention in this context that a legislative bill is in preparation for an Act on the Icelandic Crisis Response Unit and work is also in progress on preparing a code of conduct for the Unit. The legislative bill is scheduled for tabling this Autumn. 


The positive developments in Afghanistan have to some extent been overshadowed by the growing tension in the relations of the neighbouring state, Iran, with the international community. The effort to contain the proliferation of nuclear arms suffered a setback when India and Pakistan both conducted nuclear tests, and the conflicting statements of the North Korean government are creating further tension. Iran is a party to the Nuclear Non-Proliferation Treaty and has undertaken to utilise nuclear energy only for peaceful purposes under the supervision of the International Atomic Energy Agency. The disingenuousness of the Iranian government on this issue is a fact. It is also clear that if Iran were to produce nuclear weapons other states would follow suit. Such a development could destroy the Non-Proliferation Treaty and other international instruments to contain the number of countries possessing nuclear arms. This is not to mention the tension that would follow if the clerical regime in Iran possessed nuclear weapons. It is therefore encouraging that within the International Atomic Energy Agency there appears to be a consensus to hold the Iranian government to its commitments, as in fact this represents an acid test for both the organisation and the Treaty. The efforts of three Member States of the European Union, the United Kingdom, France and Germany, to try to find a diplomatic solution is laudable, and it is important that the US government should support this approach. The question remains how to respond if the Iranian Government continues its duplicity. It is also worth asking to what lengths one should go in negotiations which have the effect of strengthening the position of the clerical government at the expense of the forces of democracy.


Weapons of mass destruction in the hands of rogue governments and irresponsible states is the greatest threat to world security in our times, ranking with the risk of terrorists coming into possession of such weapons. This threat cannot be reduced or averted except with close co-operation among the member states of NATO. Their common security interests are no less great now than before.


Constructive discussions on the status and future of European security and defence have continued in light of the adaptation of NATO and the progress of the integration process within the European Union, two clearly related processes. NATO is, and will continue to be, the cornerstone of the security and defence of its member states, and in fact many of the member states of the EU do not want any changes in this respect. This is particularly true of the new member states, who place their trust in the Alliance as regards security, as the Alliance embodies the trans-Atlantic link. However, the EU can take over certain tasks, especially in peacekeeping, in which case it is reasonable that the EU should be able to turn to NATO for forces and equipment.


For some time defence discussions have been scheduled between Iceland and the United States, but these have been delayed as a result of delays in the preparations of the US government. As before, Iceland’s position is that a minimum level of defence preparedness must be maintained in this country. At the same time, the government is prepared to negotiate with the United States on ways of increasing Iceland’s participation in the running costs of Keflavik Airport.


In the wake of the terrorist attacks on the United States in 2001 and the Iraq war much important work has been done within the United Nations on defining the principal threats to world peace and seeking ways to ensure that the UN can be put to better use in the struggle against these risks. A short time ago, Secretary General Kofi Annan presented his report on development, security and human rights. The report includes recommendations on responses by the United Nations to international terrorism, the proliferation of weapons of mass destruction, poverty, epidemics and organised crime. The conclusions and recommendations of Mr. Annan concerning security confirm the points of emphasis of many western states in recent years, including Iceland, especially as regards the threat of international terrorism and the proliferation of weapons of mass destruction. The Secretary General also points out that in some cases measures may require the use of preventive military action. He calls on the UN Security Council to forge a consensus on certain criteria concerning the circumstances under which the Council could authorise the use of force. It can be inferred from Mr. Annan’s report that if no consensus is reached on this matter the Security Council will find itself in a weakened position. In other words, if the United Nations fail to address the most pressing security threats they are doomed to irrelevance. On the occasion of the 60th anniversary of the United Nations the leaders of the member states will gather this autumn, and a position will be taken concerning the recommendations of the Secretary General. As before, Iceland will be contributing to this important discussion.


Work is continuing on preparations for Iceland’s candidacy for a seat on the Security Council of the United Nations. However, some persistent questions have come up in my mind as regards the expense of the candidacy and Iceland’s representation on the Council in 2009 and 2010. It is clear that we will face an uphill battle against our competitors, with Austria and Turkey vying with Iceland for the two seats available to the Western Europian and other states group (WEOG). It is unfortunate that it proved impossible to arrive at an agreement on a candidacy of only two states, enabling smaller member states to participate in the work of the Security Council without first going through an expensive and difficult election campaign. The Foreign Ministry prepared a budget of just over ISK 600 million for the campaign and the service on the Council. It is safe to assume that as the campaign progresses it will grow more intense with resulting costs. For this reason, Iceland’s candidacy has been under review, to be concluded in the coming weeks. If we are going to persist in our candidacy we cannot wait too much longer before renewing our campaign with full force.


The report of Secretary General Kofi Annan cited above contains a remarkable and long overdue recommendation on improving the deliberations on human rights within the United Nations. The current arrangements permit states which ignore their human rights obligations to sit at the same table with other countries.  This is a ridiculous arrangement which detracts from the credibility and usefulness of the organisation. The recommendation of the Secretary General is to set up a new Human Rights Council, which will be open only to those who are prepared to abide by the highest human rights standards. The Council is intended to be a standing council to monitor situations and to address human rights violations. This recommendation of Mr. Kofi Annan has the full support of the Icelandic government and will hopefully be implemented.


The United Nations, appropriately, rely heavily on the support of various regional organisations. Thus, the Organisation for Security and Co-operation in Europe plays an important role in supporting democratic government, e.g. by monitoring elections, which needs to be strengthened still further. Even smaller organisations than the Organisation for Security and Co-operation contribute directly or indirectly to security and stability, and in this context it is worth noting that Iceland will soon be taking over the presidency of the Council of the Baltic Sea States. This leaves what is perhaps the most effective regional co-operation in history, i.e. Nordic co-operation, which will continue to be a key feature of Icelandic foreign policy.   



Mr. Speaker


Preparations for proceedings against Norway before the International Court of Justice are well under way. A detailed and well-founded report prepared by an expert outside Iceland for this specific purpose is now ready and under evaluation in the Ministry. At the same time, bilateral consultation meetings have been held concerning the Svalbard issue with various member states of the Spitzbergen Treaty, with further meetings scheduled in the near future. These states have shown great interest in the matter, and it is clear that they will need to take a position on how they intend to protect their own interests as parties to the Treaty in the upcoming court proceedings.


The reason for the decision of the government to proceed against Norway before the International Court is, as is well known, the repeated violations by Norway of the Spitzbergen Treaty. The limit of patience was reached last year when the Norwegian government obstructed the renewal of the Herring Agreement and subsequently limited herring fisheries unlawfully in the Svalbard region in order to strengthen Norway’s position and weaken the position of the other parties to the Herring Agreement. This abuse by the Norwegian government of its purported sovereign right to the Svalbard area is unacceptable. It appears that taking the matter to court is the only way to secure Iceland’s lawful interests in the area. 




Mr. Speaker


As always, it is the purpose of Icelandic foreign policy and the objective of the Foreign Service to protect the interests and welfare of our country and nation. As before, this can best be achieved through co-operation with our allies and other democratic states on securing peace and freedom in the world.




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