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C O N F I D E N T I A L SECTION 01 OF 04 PARTO 060602 
 
(Note: the unique message record number (MRN) has been modified. The original MRN was 08 PARTO 000002, which duplicates a previous PARTO telegram number.) 
 
E.O. 12958: DECL: 06/06/2018 
TAGS: OVIP RICE CONDOLEEZZA PREL MARR NATO ECON
SENV, KPKO, AF, RU, SU, ZI, CN, XA, XQ, IC 
SUBJECT: (U) Secretary Rice's May 30, 2008 lunch meeting 
with Icelandic Prime Minister Geir Haarde 
 
¶1.  (U)  Classified by:  Kenneth Merten, Deputy Executive 
Secretary, S/ES, Department of State. Reason 1.4.(d) 
 
¶2.  (U)  May 30, 12:15 p.m., Reykjavik, Iceland. 
 
¶3.  (U) Participants: 
 
United States 
The Secretary 
Ambassador Carol van Voorst 
Under Secretary Reuben Jeffery III, E 
Assistant Secretary Daniel Fried, EUR 
Assistant Secretary Sean McCormack, PA 
Chief of Staff Brian Gunderson 
Embassy Reykjavik DCM Neil Klopfenstein 
Political Officer Brad Evans, Notetaker 
 
Iceland 
Prime Minister Geir H. Haarde 
Foreign Minister Ingibjorg Solrun Gisladottir 
Gretar Mar Sigurdsson, Permanent Secretary of State 
Bolli Thor Bollason, Permanent Secretary at the PM's 
Office 
Sturla Sigurjonsson, Foreign Policy Advisor to the PM 
Greta Gunnarsdottir, Director General for International 
and Security Affairs 
Kristrun Heimisdottir, Political Advisor to the FM 
Greta Ingthorsdottir, Political Advisor to the PM 
Thorir Ibsen, Director, MFA Defense Department 
Elin Flygenring, Chief of Protocol 
Jon Egill Egilsson, Director for Natural Resources and 
Environmental Affairs 
Nikulas Hannigan, Director for International Affairs 
 
 
¶4.  (C) SUMMARY:  Secretary Rice, Prime Minister Haarde, 
and Foreign Minister Gisladottir reviewed Icelandic 
initiatives in defense and security as well as 
developments in the High North.  Russia poses a challenge, 
particularly in areas of the former Soviet Union.  PM 
Haarde announced Icelandic plans to contribute to the 
U.K.-sponsored NATO helicopter trust fund in Afghanistan. 
The Secretary outlined some of the challenges in Africa 
today; Iceland is looking for ways to play a helpful role 
on the continent.  Attendees agreed that both the United 
States and Icelandic economies have suffered from tighter 
global credit markets, but the worst seems to be over. 
END SUMMARY. 
 
------------------------------------ 
DEFENSE RELATIONS WITH U.S. AND NATO 
------------------------------------ 
 
¶5.  (C) Prime Minister Haarde began by reviewing Iceland's 
efforts to manage its peacetime defense in the 18 months 
since the U.S. military withdrawal from Iceland.  The 
U.S.-Iceland defense relationship is still the cornerstone 
of Iceland's defense policy.  At the same time, Haarde's 
government has focused on five key areas.  Iceland's new 
national Defense Agency will have responsibility for 
managing day-to-day issues and operational relations with 
NATO, and will start work on June 1.  The new NATO air 
policing mission, with a French deployment currently in 
Iceland and a U.S. rotation scheduled for fall 2008, has 
filled a key security need, and Haarde expressed his 
appreciation for U.S. support and the helpful role played 
by NATO Secretary General de Hoop Scheffer.  Peacetime 
security cooperation with neighboring states is moving 
ahead steadily as with Iceland signed security MOUs with 
Norway, Denmark, the UK, and, later this summer, Canada. 
Iceland is maintaining or increasing its NATO 
contributions in Afghanistan and to the NATO Security 
Investment Program, and is exploring a contribution to the 
Estonian-hosted Cyber Defense Center.  A government- 
appointed committee will provide Iceland's first 
comprehensive threat assessment this fall, and Haarde 
expects that this will shed some light on Iceland's way 
forward.  The Secretary said she was glad to hear how well 
things had gone for Iceland in defense and security and 
suggested that as Iceland's new defense institutions gain 
experience it would be useful to review bilateral defense 
relationship to gauge the need for further revision. 
 
---------------------------------- 
ARCTIC SECURITY AND THE HIGH NORTH 
---------------------------------- 
 
¶6.  (SBU) PM Haarde drew the Secretary's attention to 
Iceland's sponsorship of a NATO conference on security in 
the High North in January 2009, and passed on a concept 
paper.  NATO SYG de Hoop Scheffer is scheduled to be the 
keynote speaker, and Iceland is anticipating high-level 
participation from Allies, including Norwegian PM Store. 
Secretary Rice pledged that the United States would be 
well represented at the event, although timing was a 
problem. 
 
¶7.  (C) Secretary Rice noted the U.S. awareness of 
developments in the Arctic and that we were still shaping 
our approach to the region.  Under Secretary Jeffery 
detailed the broad range of issues that Arctic policy must 
encompass, including energy, transportation, 
environmental, and traditional security affairs.  PM 
Haarde agreed, pointing to the expected increase in 
petroleum and gas shipments to the United States as Arctic 
waterways become more open.  FM Gisladottir urged that the 
Arctic Council be the venue for all discussions on these 
matters, and lamented that the recently concluded Danish- 
sponsored Arctic Ocean Conference in Greenland did not 
include all Arctic states.  The Secretary noted our 
support for the Arctic Council, but asked if Iceland was 
addressing High North issues in any other fora.  PM Haarde 
pointed to the January 2009 conference as evidence of 
Iceland's efforts to focus NATO on the region. 
 
--------------------- 
RELATIONS WITH RUSSIA 
--------------------- 
 
¶8.  (C) PM Haarde observed that Russian activities in the 
Arctic are of political-military concern as well as an 
energy security issue.  Haarde described the significant 
increase in Russian military flights near Iceland, adding 
that the flight profiles now tend to circumnavigate the 
island rather than simply touch on Icelandic airspace as 
during the Cold War.  He noted appreciatively President 
Bush's comments on Russian overflights at the NATO 
Bucharest Summit, and said that Icelandic inquiries to the 
Russians had produced little other than the Russian 
Ambassador in Reykjavik's televised comments that Iceland 
should "get used to it."  These flights can also pose a 
risk to civil aviation, particularly given the age of the 
Russian aircraft.  The Secretary, referring to similar 
flights near Alaska and U.S. assets in the Pacific, said 
that the U.S. tries not to overreact to these actions but 
we do let the Russians know they are unhelpful. 
 
¶9.  (C) Asked for her assessment of Russian politics, the 
Secretary said the United States is still getting used to 
"Prime Minister Putin," and it is not yet clear how he and 
Medvedev will interact.  Medvedev is of a new generation, 
and due to his good connections with governors around the 
country may have a power base distinct from Putin. 
Russian foreign policy will not change, however.  They 
have been helpful on Iran and North Korea, somewhat 
helpful in the Middle East, and good on counterterrorism. 
Anything that seems to touch the former Soviet empire such 
as Georgia, however, is sensitive.  This puts us in a 
difficult position with the NATO Membership Action Plan 
(MAP) for Georgia -- Allies cannot let the frozen conflict 
in Abkhazia be the sole reason to keep Georgia out, as 
this gives Russia an incentive to be unhelpful.  PM Haarde 
predicted that MAP will be approved at the December NATO 
meeting.  He observed that Icelandic-Russian relations 
were generally good, apart from the overflights issue, 
though the Russians can be difficult to understand. 
 
------------------- 
NATO IN AFGHANISTAN 
------------------- 
 
¶10.  (SBU) The Secretary thanked PM Haarde for Iceland's 
support of NATO operations in Afghanistan.  Haarde said 
Iceland was planning to shift funding from support for 
NATO/Afghan National Army airlift to the UK-sponsored 
Helicopter Trust Fund.  He described the meeting in 
Bucharest on Afghanistan as exceptional for the broad 
consensus among all Allies and the international community 
on the way forward. 
 
------ 
AFRICA 
------ 
 
¶11.  (C) Haarde asked the Secretary for her views on 
developments across Africa, commenting that although 
Iceland has not historically had a strong presence there, 
FM Gisladottir is putting more emphasis on relations with 
African states.  Secretary Rice described a wide variance 
among nations on the continent, with some high performers 
such as Botswana, Tanzania, and Mozambique doing well in 
combating HIV/AIDS, cooperating with the United States on 
Millennium Challenge goals, and managing conflicts in 
Liberia and the Democratic Republic of Congo.  Zimbabwe is 
a galling problem, and South Africa has greatly 
disappointed as a regional power in helping the situation 
there.  Haarde and Gisladottir agreed with the Secretary 
that the June 27 runoff election in Zimbabwe seems 
unlikely to resolve the political conflict and may well 
lead to more violence. 
 
¶12.  (C) Gisladottir observed the tendency among European 
states to think of Africa as a "development problem" 
rather than focusing on political dialogue.  The Secretary 
agreed, pointing out that we need the high performers in 
Africa to take on responsibility regionally and worldwide, 
as well as within their own countries.  In that vein, the 
United States is hoping to see the African Union develop 
its crisis response abilities.  PM Haarde expressed 
concern over growing Chinese influence in the region, 
which appears to be entirely resource-targeted and shows 
no concern for political development.  The Secretary 
agreed, but said that Africans themselves are suspicious 
of the very mercantilist approach by the Chinese.  On 
Darfur, Secretary Rice described the tenuous state of 
peacekeeping efforts and probed Icelandic interest in 
supporting the equipment needs of contributing African 
nations.  Gisladottir said her ministry was looking into 
this possibility. 
 
---------------- 
ECONOMIC OUTLOOK 
---------------- 
 
¶13.  (U) U/S Jeffery outlined the current economic 
situation in the United States and the USG's response. 
The consensus is that we are near the end of the downturn, 
but exactly how near is still a question.  The long- and 
mid-term outlooks are good.  In the short term, regional 
dips in real estate will still drive the situation 
downward, but rising exports will help to counter that 
trend.  In response, the Federal Reserve has been far more 
active than the past in adding liquidity.  Similarly, the 
United States has enjoyed good cooperation with other 
central banks to ensure liquidity in the international 
markets. 
 
¶14.  (SBU) PM Haarde replied that Iceland has also 
suffered from this liquidity squeeze.  Combined with a 
larger macroeconomic adjustment the government was already 
expecting, this unexpected crunch put a lot of pressure on 
the Icelandic economy.  Haarde said that for a while he 
felt as though Iceland's small currency was the weakest 
animal in the herd, being targeted by predatory hedge 
funds and speculators.  However, he believes Iceland is 
through the worst and that things will continue to 
stabilize.  U/S Jeffery agreed that the fundamental 
elements of the Icelandic economy appeared sound. 
RICE