by H.E. Mr. Geir H. Haarde, Minister for Foreign Affairs
and External Trade
Delivered at the Althing at its 132nd legislative session, 2005 - 2006
The world is constantly changing, even in the short time between reports by the Foreign Minister to the Althing on the current aspects of foreign affairs. Where just a few months ago events appeared to be heading in the direction of peace, violence has erupted, and threats which were unknown to us then are the challenges of today. It is sufficient to mention the alarming developments resulting from the plans of the Iranian government, which appears to be determined to set out on a path of nuclear armament. There were hopes that a certain stability had been achieved in Afghanistan, but now the Taliban have grown in strength once more, undermining the existing peace with acts of violence and attacks. In Iraq, efforts to form a government have unfortunately been unsuccessful, and acts of violence, kidnappings and killings have been on the rise as a result of the tension between Shi’ite and Sunni Moslems. The Icelandic government has endeavoured to carry its share of the burden, among other things through repeated allocations to a NATO fund intended for the training of Iraq’s security forces. The death of Yassir Arafat appeared to open new opportunities for the resolution of the conflict between the Palestinians and the Israeli, as Arafat had for a number of years been seen as an obstacle to peace. The prospects appeared quite bright until the parliamentary elections in the Palestinian Autonomous Territories in late January 2006, where the belligerent Hamas emerged victorious. Elections have also been held recently in Israel, and it is not clear what implications the current situation will have for the future of the peace process. Another no less uncertain factor is the suffering caused by natural catastrophes. In response to the problems that arise without warning across the world, Iceland aligned itself with the first countries to contribute to a new United Nations fund intended to finance responses to natural disasters.
The Cold War has now been over for quite a long time. It may be that it is now time to cease our continual references to that time, which the younger generation of this country knows only from books and films, as was the case with my generation and World War II. However, in order to explain the security and defence situation of our times, it is still necessary to look to the past. This is the case with the situation that will form the principal subject of my report to the Althing today. I am referring, of course, to the defence of Iceland in the light of the departure of the Defence Force, which has secured for decades the defences of our country and our nation.
There were high hopes 15 years ago that a new era without conflict was dawning in the history of Mankind. The reality turned out quite differently. The collapse of the Soviet Union and the close of the Cold war released the forces of nationalism and gave rise to power struggles that had been smouldering under the surface. Nevertheless, there were hopes that it would be possible to work together on securing stability and peace.
The reduction of the US armed forces in Western Europe, NATO's traditional area of operation, began immediately. The conflict in the Balkan Peninsula toward the end of the last century had the effect of drawing NATO out of its area to the southeast, where a vacuum needed to be filled following the collapse of Communism when it was revealed that the United Nations and the European Union did not have the capabilities to do so.
For most of the last century, threats stemmed primarily from hostile nations. But in the changed world order the nations of the world were confronted with a number of different threats, ranging from hostile dictatorial states and complex ethnic conflicts to tiny terrorist groups. It also became clear to everyone that it would be necessary to look at threats such as epidemics and major environmental disasters in protecting national interests. The result of globalisation was that even the most distant problems appeared near.
Although new international terrorist forces made their presence felt already at this time, it was not until after the attacks on New York and Washington on 11 September 2001 that the international community stared in the face of the threat posed by these forces. These events brought to a close the process of adaptation to the new situation following the end of the Cold War, and since that day our security and defence priorities have undergone a transformation.
The principal change in world security is that the primary challenges of the organisations of which we are members have shifted. The Middle East, Asia and Africa are the centres of conflict and instability in our times. The deployment and stationing of armed forces has increasingly taken account of this fact.
It is not unreasonable, therefore, that NATO, led by the United States, is now trying to adapt is defensive capabilities to these new circumstances. The fact is, however, as all our allies assume, that the asymmetrical threats of the present know no geographical boundaries and therefore it is necessary to have capabilities in place everywhere in order to meet them.
The Atlantic link remains as important for the mutual security of Europe and the United States as it has been for decades. Article 5 of the North Atlantic Treaty concerning mutual defence is still the core provision that it has always been. The trends that have naturally emerged as we adjust our sights to new and often distant threats must not result in a lack of alertness on the home front.
This was point was clearly made in my recent meetings with the leaders of our allied countries, where I focused my efforts on discussing defence and security in the light of the changed circumstances. Even though our neighbouring countries cannot say with any certainty what threats we should anticipate, none of them feel that they can do without secure military defences, including air defence. A booklet issued by the Swedish Ministry of Defence in October 2004 on Sweden’s defence policy says, among other things, that the armed forces are responsible for defending the territory of the country and its sovereignty.
At the same time that NATO has taken on tasks out of area its core activities have undergone a transformation. Plans are in place to set up a NATO Response Force of 60 thousand troops, which can be deployed with 30 days' notice anywhere in the world where it is needed. It is assumed that the Response Force will be fully operational next year. Work is in progress on focusing the activities of NATO on providing support for missions of this kind in terms of communications, logistics and intelligence, in addition to manning the Response Force itself.
Within the European Union, work has been in progress on gradually building up capabilities for joint missions. This work is nowhere near to being completed, and the Union does not, and will not in the foreseeable future, have the military capability to undertake missions of the kind already being undertaken by NATO. The emphasis has been on avoiding any overlap of the activities of NATO, on the one hand, and the work of the European Union, on the other hand, and on the need for a clear division of labour. This applies particularly to peacekeeping missions. The European Union has, until now, primarily had the role of taking over NATO’s mission when prospects of peace have improved, as in the case of the Balkans, or it has funded peacekeeping missions, as in the case of Darfur in the Sudan. NATO is working on a much broader security base than the EU. It is not the role of the European Union to ensure the military security of its member states, it is not a defence alliance and does not possess the capability to take on responsibilities of that sort. The capabilities of the European Union are not geared to common defences, as in the case of NATO. For example, the EU does not have the required military command structure. It should also be borne in mind in this context that NATO and the EU are for the most part made up of the same member states, each of which has only one army. It is often difficult to persuade European countries to deploy troops when missions are being planned, and most of them are reluctant to increase their defence spending. It is therefore clear that any competition between the EU and NATO concerning defence capabilities is quite unthinkable, and would have a negative impact on security in the region and elsewhere.
The United States have led the transformation process of NATO. Their focus has shifted eastwards, and the changes in their military structure have been extensive. The changes have occurred wherever US forces are stationed, inside and outside the United States. As everyone knows, the United States, together with their Allies, are involved in difficult conflicts in Iraq and Afghanistan, and for this reason they have attempted to station their forces where they are most useful. At the same time an attempt has been made to bring about a reduction in forces where threats are less acute. Armed forces have been withdrawn for the most part from the Balkans and other Allied countries will from now on be responsible for the most troop-intensive aspects of the mission in Afghanistan.
Even though NATO has been working on adapting itself to the changed world order, the Alliance remains a defence alliance. The difference from the past is that the threats are no longer confined by borders. Terrorists at the foot of Hindu Kush can now organise and carry out an attack 10,000 miles away in Manhattan. NATO has therefore explored possibilities of taking measures to prevent hostile parties from launching their attacks. It should be borne in mind that Article 5 of the North Atlantic Treaty has only once been invoked. This was after the Al Qaeda attacks on the United States almost five years ago.
Much work has also been in progress in the United Nations, which are going through their own process of reformation. Agents of the UN are at work all over the world on humanitarian aid, peacekeeping and other missions in the interests of peace and stability. The Icelandic government has always placed great emphasis on the work of the United Nations in the interests of peace. In this country, there has always been a broad consensus concerning our participation in the work of the UN, and our candidacy for a seat in the Security Council is a part of our effort to take on added responsibilities. We have supported proposals for reforms designed to make the work of the United Nations more effective, and for a changed structure to reflect the new world order. These proposals include the Peacebuilding Commission, which the leaders of the member states agreed to establish at their meeting last year in order to make it possible to take on more varied post-conflict peacekeeping and reconstruction missions than before. The General Assembly of the United Nations agreed last 15 March to establish a new Human Rights Council to replace the former Commission on Human Rights, which had been subjected to increasing criticism in recent years, also by Iceland. Iceland voted in favour of the new Council even though the compromise achieved did not entirely meet the expectations of the Icelandic government. However, retaining the existing Commission would have been a worse option. Iceland made the declaration that states which systematically violate their human rights commitments, or are subject to sanctions by the Security Council as a result of human rights violations, should not be supported as candidates for a seat on the Council. The elections to the new Council are scheduled for 9 May of this year. A total of 47 states will be represented on the Council, which will hold its first meeting on 19 June. Iceland has never been a candidate for a seat on the Commission on Human Rights, but in light of the importance of the new Council, such a candidacy will be considered. Human rights are an important aspect of Icelandic foreign policy. When human rights and human rights treaties are ignored, this often leads to instability and armed conflict. Lasting peace and security will only be established through effective democracy and respect for human rights and international human rights legislation.
Concurrently with the changes in NATO’s activities, Iceland's participation in the work of the organisation has increased substantially. Iceland has taken on important peacekeeping responsibilities, e.g. by undertaking the administration of airports in Pristina in Kosovo and Kabul in Afghanistan. It is foreseeable that the number of NATO reconstruction and peacekeeping missions will increase in the future and contributions will be needed from all the Allies. Through its participation in the Military Committee of the Alliance since 1998, Iceland has had access to the decision making process and to information about the preparation and funding of NATO’s missions, in addition to discussions and assessments of the potential risks faced by peacekeepers.
The membership of NATO and the Defence Agreement with the United States have been the cornerstones of Iceland’s security policy for over half a century. Although one might be led to think otherwise by the recent public debate, the defence co-operation has indeed changed in the light of the changed world order. Protocols concerning the implementation of the Defence Agreement were signed in 1994 and again in 1996 to this end. Adaptation to the changed situation in Iceland has been ongoing for the past 13 years, and our position has been consistent with our understanding that circumstances have changed. Not changed enough, however, to warrant the sacrifice of an air defence capability for which there is a defined need within NATO.
Whatever the expectations may have been, it cannot be denied that 15 March was a historic day, and the unilateral decision by the United States while talks were in progress was a great disappointment and a setback for the defence co-operation. The Icelandic government had submitted proposals entailing the assumption of enormous expenditures by Iceland, among other things to ensure the continuation of credible minimum defence capabilities in the country.
The possibility of a revision, or even termination, of the Defence Agreement cannot be excluded. But in light of the fact that the US government reiterated its commitments under the Defence Agreement, the first step was for Iceland and the United States to enter into negotiating on the future of their co-operation. These negotiations must surely address the question of how to ensure the defences of the country following the US decision to withdraw their military aircraft from Iceland and greatly reduce the Defence Force in other respects. The objective of the negotiations is to arrive at a conclusion which, in the opinion of the Icelandic government, will meet the requirements for an adequate and acceptable defence capability for Iceland.
The first meeting of the US and Icelandic negotiation teams took place on 31 March. The US military is working on the preparation of a new defence plan for Iceland, which will enable the United States to honour its commitments under the Defence Agreement without the permanent stationing of aircraft here. At the meeting on 31 March, the Icelandic negotiating team submitted questions concerning the planning and discussed the points of emphasis of the government in this matter. The US are assuming that further presentation and consultation on the plan will take place in a few weeks’ time. The planning process is supervised by the US Military Command in Europe, as Iceland is located in its area.
Throughout NATO’s area, the rule applies that fighter planes must be able to intercept potentially threatening aircraft at short notice. For this reason, NATO states which do not possess fighter planes are guaranteed the assistance of those states which do possess such planes. This applies to Slovenia, Luxembourg, the three Baltic States, and now Iceland. Unlike the other states, Iceland has a bilateral Defence Agreement with the United States, which they have stated that they intend to continue to honour. For this reason, bilateral negotiations are now in progress between Iceland and the United States on how to ensure this. Although there are hopes that a solution will be negotiated with the United States to the satisfaction of the Icelandic government, the matter also needs to be discussed within NATO.
In this context it should be noted that NATO in fact represents a sort of mutual insurance system, where the Member States undertake to come to each other's assistance if their security is threatened. This means that all the Member States undertake to commit substantial funds to their own defences and for the defence of the Alliance as a whole. When Iceland became a party to NATO in 1949, we made the reservation that we should not be required to form our own armed forces. Our contribution to the Alliance was in the form of the facilities that we provided to the Defence Force on the basis of the Defence Agreement. In recent years, we have gradually increased our participation in NATO missions through the Icelandic Crisis Response Unit, air transport assistance etc. In light of the new circumstances in Iceland’s security and defence, it is reasonable for us to turn our attention even more than before to NATO. I have already made a strong case for this. However, it is obvious that a reasonable contribution on our part must necessarily consist in increased participation and an increased share in NATO missions. Otherwise we would not be paying our subscription to the mutual insurance. If we wish to rely on assistance at a critical time, we must pay the cost, as others do.
It is clear that we will undertake the operation of Keflavik Airport. The operation of an international Airport is independent of defences or the intervention of foreign sates in general. When the Defence Agreement was concluded in 1951, the situation was that we were not capable of undertaking this task owing to our small size and lack of expertise, and the undertaking was virtually inseparable from military aviation. However, it has been the policy of the Icelandic government for many years to separate civilian and military aviation, and since the construction of the Leif Eiriksson Air Terminal Iceland's share in the operation of civilian aviation has been substantial. We have now for some time been preparing – and offered in our negotiations with the United States – to undertake in full the operation and maintenance of Keflavik Airport, as everyone knows.
Speculation on the future use of the land falling within the scope the Defence Agreement and the facilities there is untimely. These are complex issues which need to be addressed in close consultation with the US government in the coming months.
I believe that a policy should be adopted of entrusting the operation of Keflavik Airport to a private company, as is the case in many other countries. A state-owned limited liability company could be established to operate the airport, but this would be only a first step as the company should then be privatised. This would present domestic and foreign investors with an attractive investment option.
Helicopter rescue is a service which in itself is unrelated to defence forces or foreign governments, and it is generally recognised internationally that governments are responsible for ensuring the availability of service of this kind. In our large and sparsely populated country and extensive jurisdiction, it has been reassuring to be able to rely on the presence of the US helicopter squadron. We owe to them the rescue of numerous human lives. But the nature of this task is such that it is self-evident that we should take it over in full, just as we took over the defence of our territorial waters at the start of the Second World War after a considerable period of adaptation following our achievement of sovereignty.
Extensive work has been undertaken to strengthen our security as regards police enforcement and defence against terrorists. Iceland has taken an active part in international co-operation in the struggle against international terrorism which is designed to hinder the passage of the assassins and the transfer of their funds. Anyone who passes through Keflavik Airport should know, for instance, that all the preparations there have been vastly increased. The same applies to the security of our ports, where the standards of the International Maritime Organisations as regards defences against terrorism have been implemented. Work will continue on building up capabilities in this country to cope with international crime, trafficking of all kinds, including in weapons, drugs and human beings, and other dangers. As before, this will be done in close co-operation with other countries, especially our Schengen partners, but also the US government.
Terrorists will stop at nothing when they strike. The atrocious threats and violence that we witnessed following the publication of a series of cartoons in Jyllandsposten are confirmation of how easily a peaceful democratic state can become the target of extremists. The new world order teaches us, above all, that unpredictable threats are widespread and that it is necessary for us to be on our guard.
There has been a lot of talk about the clash of cultures, but the fact is that advocates of democracy and human rights across the world are facing threats from extremists who cloak themselves in religious doctrine. It is extremely important for the spokesmen of different religious communities to engage in consultations and discussions in order to disperse the mutual mistrust and thereby undermine the forces of antagonism and hatred. Only then will it be possible to expose the abuse by terrorists of the great religion of Islam and Islamic values.
Russia no longer poses any threat, and it should be noted here that NATO is engaged in excellent co-operation with Russia under the auspices of the NATO-Russia Council. The activities of the Russian fleet have increased somewhat in recent years, however, and its exercises in the North Atlantic are now an annual event. Two years ago their vessels were detected inside our economic jurisdiction, raising some environmental concerns. We therefore want to ensure good communications in order to prevent a shortage of information provoking distrust between the countries. There is interest in good co-operation with Iceland among the leadership in Moscow, as revealed in my recent meeting with Foreign Minister Lavrov, and the Russian government is prepared to discuss agreements concerning rules of communications and reporting obligations between the vessels and aircraft of the Russian armed forces on the one hand and the Icelandic Coast Guard on the other. We wish for security co-operation with these neighbours in the East, as with other good neighbours and responsible parties.
There is much work to do in order to resolve the situation which has come up in our defence co-operation with the United States. Despite the fact that the decision of the US government, and in particular the way in which it came about, has caused disappointment, this new situation nevertheless presents opportunities.
The opposition has argued that the government has shown neglect in studying the security of the nation in the light of the changed circumstances and preparing appropriate reports and proposals. This claim is without any foundation.
In 1993, a report was published, prepared on the initiative of the government, on security and defence following the Cold War. The report was prepared by a committee of members of parliament from the government parties and officials from the Prime Minister’s Office and the Ministry of Foreign Affairs. Its conclusions were based, among other things, on meetings held by the committee with representatives from the United States and other NATO states, as well as high-ranking representatives of the Alliance itself.
In 1999, a working group of the Foreign Ministry prepared a report on the Defence and Security of Iceland at the Turn of the Century. As revealed in its table of contents, the Report discussed Iceland’s principal security and defence interests, changes in the international situation and adaptation to a changed security and defence environment. The Report presents clear conclusions as well as proposals which have either already been implemented or are in the process of being implemented.
It is well known that in its discussions with the US government concerning Iceland's defences, which were started 13 years ago, the Icelandic government has maintained a very clear policy concerning the minimum military defences needed in the country, in line with the policies and capabilities of neighbouring countries.
All talk of complacency and inactivity on the part of the government is therefore without foundation.
As I outlined earlier, the centre of gravity in world security has shifted eastwards. The same is true of the centre of gravity of business and economic activity. The regions showing the greatest growth in the world are now in East and South Asia. At the present time, Japan is the third largest economic power in the world after the European Union and the United States. It is very probable that GDP in China and India will approach the GDP of the three economic powers within a few decades. These two most populous countries in the world have in recent years undertaken extensive economic reform designed to liberalise trade and introduce a market economy. The huge economic growth achieved in recent years has opened up the possibility of improving the living conditions of the general public in these countries. In fact, this may be one of the greatest revolutions in history as regards standards of living in light of the number of people involved.
It is no wonder that western enterprises have begun to show a growing interest in Asia in recent years. Icelandic enterprises have not lagged behind the enterprises in our neighbouring countries. Just last February, a successful visit was undertaken by an Icelandic trade delegation to India, led by the Minister of Education, who stood in for the Foreign Minister on this occasion. Icelandic enterprises have vastly increased the scope of their activities in Asia in such diverse sectors as fisheries, pharmaceuticals and services of various kinds. It is probable that this interest will continue to grow and that the activities of Icelandic enterprises in this region of the world will increase substantially in the coming years and extend to still further sectors. The economic revival in Asia could result in virtually limitless opportunities in the coming years.
Our foreign trade policy must therefore increasingly take account of the goal of strengthening trade relations between Iceland and the countries of East and South Asia. Important steps have already been taken in this direction. Perhaps the first step may be said to have been taken with the opening of an Icelandic embassy in Beijing in 1995. Six years later an embassy was established in Tokyo, and this year an embassy was opened in New Delhi. This means that Iceland now has embassies in all the three major economies of Asia.
The growing trend in the direction of free market economies, combined with globalisation, have released powerful forces of progress in Asia. Some countries and regions in eastern and southern Asia have in recent years achieved amazing results in economic development, but it is the great and steady economic growth of China, and now India, that will probably change the face of the world.
Ever since the Chinese embarked on their economic reforms in 1980, economic development in China has been reminiscent of a fairy tale. If economic growth continues at the same pace it will not be long, barring unexpected complications, before 100 million families in China will be enjoying disposable incomes on a par with the average in Europe. In recent years, significant results have been achieved in strengthening Iceland’s trade relations with China. Iceland has entered into bilateral agreements with China on the protection of investments, on air transport and tourism, as well as a double taxation avoidance agreement. Last month, discussions were begun between the Icelandic and Chinese government on studying the feasibility of concluding a free-trade agreement between the two countries. If the results of the study are positive it may be assumed that actual discussions will be launched on the conclusions of a free-trade agreement. Iceland is the first country in Europe with which the Chinese have been willing to discuss the possibilities of free trade. This milestone is therefore evidence of the good results that have been achieved in strengthening trade relations between Iceland and China since the establishment of the embassy in Beijing.
India’s economic achievements are no less remarkable than the achievements of China. Economic growth in India has been strong in recent years. In particular, the Indians have achieved remarkable results in high technology and various services. Clearly, there are numerous opportunities for Icelandic enterprises in India. The principal objective of the establishment of an Icelandic embassy in New Delhi was to increase the trade relations between Iceland and India to a significant degree. Already, important steps have been taken in this direction. To give an example, the signature of an air transport agreement with India is anticipated this year. Discussions are in progress on a bilateral investment agreement and double taxation avoidance agreement with India, and it is hoped that these agreements will be concluded this year. The EFTA states have also expressed a strong interest in concluding a free-trade agreement with India, but it is unclear how soon discussions could begin. It is clear, however, that the opening of the embassy in New Delhi will greatly increase the possibilities of strengthening relations between Iceland and India.
Although China and India are often mentioned in the same breath when discussing the economic prospects in the world, the two countries are extremely different and direct comparisons are perilous. The road to success is fraught with difficulties, and a states achieve greater international influence, greater demands are made on them as regards democratic government and accountability in the international community. For the long term, the tradition of democracy will be India’s greatest strength. When India is praised as the most populous democracy in the world, this reflects both the international admiration that such a large and diversified nation has managed, in spite of difficulties, to defend its democracy and democratic values and the belief that democracy is the prerequisite for stability and reforms in South Asia.
Unlike the economies of its neighbours in Asia, the Japanese economy has gone through a period of stagnation in recent years. However, there are now signs that a corner has been turned in the Japanese economy. The Japanese economy remains at the forefront in the world and presents various opportunities in addition to the numerous existing business connections that Icelandic enterprises have already established there.
I have spoken in very broad terms about the co-operation between Iceland and the leading countries in Asia in terms of trade. Increased relations with these countries are also a sign of our adaptation to a changed world. But even though attention is inevitably focused on these countries, there are other interesting markets in Asia where it is important for us to foster trade relations. The EFTA states, for instance, have concluded a free-trade agreement with Singapore, and last December I signed a free-trade agreement between EFTA and South Korea. Discussions are currently in progress between EFTA and Thailand on the conclusion or a free-trade agreement, and a declaration of intent has been signed with Indonesia. In addition, the possibilities are being explored of a free-trade agreement with Malaysia.
Last December, I attended a ministerial meeting of the World Trade Organisation in Hong Kong. The conclusion of this meeting was that an effort should be made to bring the discussions of the Doha round to a conclusion this year. The parties are still some distance apart, however, and there are various indications that it may prove difficult to achieve the free-trade objectives established by the member states at their meeting in Hong Kong. The risk of failure gives added importance to the co-operation of the EFTA states in their discussions on free trade with other states, particularly in Asia. Nevertheless, we must emphasise the importance of the WTO in preparing the ground for increased trade between nations. As an example, average tariffs in China used to be over 40 per cent, but fell to six per cent after China became a member of the Organisation in 2001.
Although I have devoted much of my time here to developments and opportunities in Asia, this does not mean that there has been any lack of activity in our relations with our neighbouring countries. Most of our foreign relations activities are still with our neighbours and closest allies on both sides of the Atlantic. I have made a point of meeting with colleagues in the Nordic countries and other friends, where I have held open and useful talks about current affairs. At the same time that we explore our opportunities in Asia it is important to remain alert to new opportunities that may be remain hidden in well known markets.
Europe is Iceland’s most important market. Iceland’s trade with the other countries of the European Economic Area accounts for 70 per cent of our foreign trade. The experience of recent years has shown just how solid a foundation the Agreement on the European Area has created for our trade with Europe.
It will continue to be our constant task to study where in the world there may be new opportunities for Icelandic enterprises. It is of course the business sector itself that has to lead the way. The role of government is to ensure that Icelandic enterprises enjoy the same competitive environment as enterprises in other countries, in particular those of our competitors.
In my report I have focused primarily on two subjects. On the one hand Iceland’s increased relations with Asia and the opportunities for Icelandic enterprises in that region of the world, and on the other hand on our defence co-operation with the United States.
It is the duty of government to preserve the interests and security of Iceland to the best of its ability in a new environment. The present government does not intend to shirk that duty.
 Central Emergency Response Fund, contribution of ISK 10 million.