Iceland & the EU

The Commission should stand firm on Iceland's accession negotiations

Stephen Tindale
08 August 2012

Iceland is the world’s longest running democracy. At a time when some member-states are struggling with democracy in the face of economic crisis, and the European institutions are still being criticised for a democratic deficit, Iceland would therefore be a valuable and welcome member of the club. Iceland also has much to teach the EU about energy policy: it generates three quarters of its electricity from hydroelectricity, and the rest from geothermal plants. All of its heat comes from geothermal.  However, the European Commission should remain firm on its negotiating demands on fishing and whaling.

Iceland applied to join the EU in 2009, in the aftermath of its banking crisis. The island saw EU membership as a source of stability and economic recovery. Out of the 35 negotiating chapters, 18 have been opened. Ten of these have been provisionally completed. Enlargement Commissioner Stefan Füle hopes that accession negotiations will be completed in 2013 – though the most difficult chapters, on agriculture, environment and fisheries, have not been negotiated yet.  As a member of the European Economic Area (EEA) and Schengen, Iceland has already adopted two-thirds of the acquis.

Iceland’s accession bid has quite broad support among member-states. The main obstacle to its accession is that Icelanders themselves are likely to reject it. Once negotiations are completed, Icelanders will vote in a referendum on whether or not to join the EU. Polls suggest that only around a quarter support EU membership, with over half against and around a fifth undecided. The level of support for membership has fallen since negotiations began in 2009. This is in part because Iceland’s economy has recovered from the serious 2008 banking and debt crises, and is now growing at over four per cent per year. And EU membership is no longer seen as a source of stability.  But support for membership has also fallen because of the European Commission’s perceived (by Icelanders) unfairness towards Iceland over the Icesave  settlement and the current “mackerel war”. And the totemic issue of whaling remains to be confronted.

Icesave was an online facility run by the Icelandic bank Landsbanki between 2006 and 2008. It gained over 300,000 customers in the UK, and over 125,000 in the Netherlands. But in 2008 Landsbanki was placed into receivership. The British and Dutch governments argue that the Icelandic government is obliged to pay at least €20,000 to each depositor, and that Icelandic and foreign depositors must be treated in the same way. Reykjavik disagrees. It argues that, had the restructured bank been obliged to bear the full cost of the debt, it would have had a negative equity of €2.6 billion, which would have had to be paid by Icelandic taxpayers.

Half the Icesave debt to depositors has now been repaid. The EFTA Court will hear legal argument about the remainder on September 18th.  The time for negotiation over Icesave has passed, since the matter is now before a court. So the key negotiating issues are fishing and whaling. The European Commission should remain firm on these issues. It would be counter-productive to lower existing EU standards to attract a new member. If this firmness leads to Iceland voting no in a referendum, so be it.

Fishing has always been a bone of contention between Iceland and other European countries. The Common Fisheries Policy is not included in the EEA, so Iceland can set its own policy. The fishing industry provides 40 per cent of Iceland’s export earnings, and eight per cent of employment on the island.  The current dispute focuses on mackerel. Iceland has increased its annual quota for mackerel catch enormously – from 2,000 tonnes to 146,000 tonnes. Reykjavik argues that this is sustainable because climate change is resulting in more mackerel in its waters. The Commission disagrees, and argues that Iceland’s quota is 36 per cent higher than it should be to be sustainable. Ireland, France, Portugal and Spain are demanding sanctions. The Commission has threatened to block Icelandic ships from unloading mackerel at EU ports.

The EU and Ice­land (plus the Far­oe Islands and Nor­way) will meet in Lon­don in Sep­tem­ber to try to reach agreement.  Some movement by the Commission, to defuse the argument and avoid conflict, would be understandable. But the Commission should not move much. It should continue to base its position on its scientific estimate of a sustainable catch.

On whaling, the Commission should not move at all. In 2006 Iceland resumed commercial whaling of fin whales and minke whales. Thus it joined Norway in defying the international moratorium on commercial whaling.  Iceland has always caught some minke whales for “scientific research”.  So the 2006 decision made little practical difference on minke – it simply represented Iceland becoming more open about its reasons for whaling. But it did represent a restart of fin whale hunting. Fin whales are an endangered species. Iceland maintains that there are enough fin whales in Icelandic waters for a small catch to be sustainable. This may or may not be correct, but is anyway not relevant to EU negotiations. EU law prevents the killing of any whales, even those which (like minke) are relatively numerous.  EU law is based partly on the need to protect biological diversity, but partly also on the need to prevent animal suffering.  Being killed by harpoons is a particularly painful, and often slow, way for an animal to die.

By no means all Icelanders favour whaling. Whale watching is an important part of their tourism industry – and increased tourism is one of the drivers of economic recovery. Yet some Icelanders argue that whaling is an important part of their culture and tradition. Culture is important, and European integration must respect most cultural traditions. But not all, and not those which involve cruelty. Iceland has an impressive culture –and has produced some of the world’s greatest literature. So it ought to be possible, in the twenty-first century, for Icelanders to separate their cultural heritage from whaling. If this is not possible, EU membership should also not be possible.

In any case, the ongoing dispute about Icesave and the Icelandic economic recovery may well result in Iceland voting no to EU membership, whatever concessions the Commission has offered on fish and whales. The EU should not lower its standards whatever the rewards. To lower them and get no reward would be particularly unwise.

Stephen Tindale is an associate fellow at the Centre for European Reform