Will Iceland join the EU?

The writer directs the Center on the US and Europe at the Brookings Institution

At one of Europe’s most precarious moments since 1945, Iceland, an Arctic island with just short of 400,000 inhabitants, will hold a consultative national vote on August 29 on whether to restart EU membership talks, suspended a decade ago over a disagreement about fish.

The EU, with 27 member states, 452mn inhabitants and $23tn GDP, is keen to have this small country join. Iceland is a stable, prosperous and sophisticated democracy with a $39bn GDP. As a member of the European Economic Area — the single market uniting the EU together with Iceland, Liechtenstein and Norway — as well as the Schengen passport-free zone and the European Free Trade Association, it is already largely compliant with EU rules.

As a full member, Iceland would be a net contributor to the EU budget. It would (especially if joined someday by Norway) rebalance the past eastward expansion trend financially and geographically. Better yet, it would reaffirm the principle of merit-based accession: an important message for current candidates like some western Balkan countries and Ukraine that are struggling with reforms.

EU officials have therefore flagged the possibility of expedited entry and “room for flexibility” on contested topics like fisheries, given that marine products make up 40 per cent of Iceland’s exports. Polls show that islanders are about equally divided on the question, so turnout will be decisive. (An accession agreement would in any case have to be validated by a second referendum.)

The proponents of opening negotiations are Prime Minister Kristrún Frostadóttir’s Social Democrats and one of her coalition partners, the pro-EU Reform Party. They say this voter consultation is just about getting a mandate to negotiate and that in its current half-in-half-out state, Iceland is a rule-taker but not a rulemaker.

Opponents, including the centre-right Independence Party (in the opposition), and the centre-left People’s Party, a member of the governing coalition, fear that opening talks would create momentum towards membership. They are concerned about losing control over Iceland’s fishing waters and maintaining political autonomy.

There is a key difference between 2015, when Iceland withdrew its candidacy, and today: vulnerability. In 1949, Iceland was a founding member of Nato, despite being the only alliance member without an army or an intelligence service (it does have police and a coastguard). But its location just under the Arctic Circle between Greenland and Norway made it doubly essential: as a forward outpost for US homeland defence and as a sentinel in the so-called GIUK (Greenland-Iceland-UK) gap, watching over the exit route for the Soviet Union’s nuclear submarine fleet from the Barents Sea.

Now, Iceland’s maritime neighbourhood is increasingly contested — and Europe’s northwestern flank is no longer protected by a benign US hegemon. Russian vessels have been mapping underwater infrastructure like pipelines and cables all over the north Atlantic. The closure of the Strait of Hormuz has China and other countries eyeing and beginning to use the Northern Sea Route over the top of Russia. And while military co-operation with the US continues, President Donald Trump’s predatory lunges for Greenland (which he has confused with Iceland) keep Icelanders vigilant.

Reykjavík recently adopted a new defence and security policy focused on societal resilience and the protection of critical infrastructure, and signed a slew of mini and bilateral defence agreements. But, for all its wealth, its defence spending falls far short of the Nato resilience goal of 1.5 per cent of GDP. It is dependent on imports for essentials, and on subsea cables for connectivity. Prices and interest rates are sky-high; its currency, the króna, is highly volatile.

The Europe that Iceland rejected in 2015 has also changed. Europeans are moving to shoulder more of the continent’s defence within Nato, a process turbocharged by Russian aggression and a US review of its European deployments based on loyalty tests. The EU is backstopping the defence spending by loosening fiscal constraints and using limited common borrowing vehicles. It is also concluding trade agreements around the globe.

As a security conference organised by the Reykjavík think-tank Varða in June showed, Icelanders are highly aware of their deep connections with Europe and Ukraine. What form those ties should take is for only them to decide. But this time, their decision could also shape the future of Europe.