VZCZCXRO9382
RR RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSL RUEHSR
DE RUEHRK #0203/01 3201643
ZNY CCCCC ZZH
R 161643Z NOV 09
FM AMEMBASSY REYKJAVIK
TO RUEHC/SECSTATE WASHDC 4217
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHNSC/NSC WASHDC

C O N F I D E N T I A L SECTION 01 OF 02 REYKJAVIK 000203 
 
SIPDIS 
 
TREASURY FOR MYERS AND NORTON 
NSC FOR HOVENIER 
 
E.O. 12958: DECL: 11/13/2019 
TAGS: PGOV PREL EFIN IC
SUBJECT: INDEPENDENCE PARTY LEADER SEEKS MEETING WITH WHITE 
HOUSE TO DISCUSS IMF 
 
Classified By: CDA SAM WATSON FOR REASONS 1.4 (B) AND (D) 
 
1.(C)  Summary. Charge d'Affaires (CDA) met Bjarni 
Benediktsson, leader of the opposition Independence Party, to 
discuss a range of issues on November 11.  Benediktsson was 
eager to discuss a letter that he had sent recently to the 
National Security Council (NSC) requesting a meeting with a 
senior White House official.  Were he to receive such a 
meeting, Benediktsson said he would express outrage with how 
the IMF was used as a tool against Iceland in the Icesave 
dispute.  He also would like to talk about future 
opportunities for bilateral cooperation between Iceland and 
the United States.  End Summary. 
 
Frustration with the IMF,s Role in Icesave 
--------------------------------------------- - 
¶2. (C)  Charge d'Affaires met opposition Independence Party 
Chairman Bjarni Benediktsson to discuss a range of issues on 
November 11.  Benediktsson said that one reason he hoped to 
meet a high ranking official from the White House was to 
express frustration with the role the IMF played in the 
Icesave dispute. He opined that the Icesave matter was, 
originally, an issue that involved only the 
Governments of Iceland, Great Britain and the Netherlands. 
The dispute among the three countries, he said, centered on 
whether the Icelandic government must serve as guarantor for 
British and Dutch depositors that lost money when the 
Icelandic banking system collapsed.  There was no EU 
legislation, according to Benediktsson, that obligated 
Iceland to act as such a guarantor and legal precedents on 
the topic were murky at best.  Great Britain and the 
Netherlands, he said, understood that they were not operating 
from positions of strength and brought the IMF into the 
equation to force Iceland's hand.  The threat of withholding 
IMF loans until the Icesave dispute was resolved was used to 
force the Government of Iceland to capitulate.  It was, he 
contended, a great misuse of the IMF and completely unfair to 
Iceland. 
 
¶3. (C)  Benediktsson suggested that, at this point, the best 
thing that could happen for the Icelandic people would be for 
the measure to fail in a Parliamentary vote.  The British and 
Dutch would then, he said, be forced to sue the Government of 
Iceland and seek compensation via the courts.  A legal 
solution would, he felt, be more preferable than the 
negotiated settlement that is being thrust on the people of 
Iceland.  Benediktsson added that if the British and Dutch 
did not feel comfortable pursuing the matter via Icelandic 
courts, he would be happy to suggest that the issue be 
resolved by a tribunal of independent judiciaries.  He even 
suggested that a U.S. Supreme Court Justice could play a role 
as an arbitrator in the proceedings. 
 
¶4. (C) Bendiktsson said that, in an attempt to force the 
issue into the courts, he intends to oppose the 
government-sponsored Icesave bill when it comes up for a vote 
in Parliament.  (Note:  Benediktsson, along with most of his 
opposition Independence Party colleagues, abstained when the 
previous law was passed in August.  End note).  He 
acknowledged, however, that the coalition government probably 
had the votes necessary to pass the measure through 
parliament.  He also admitted that, were he to have his way 
and the bill fail in parliament, it could further stall 
Iceland's recovery efforts.  It would certainly mean no 
further loans from the IMF and, without that cash inflow, the 
government would be unable to lift its capital control 
restrictions and would likely have to issue Euro bonds to 
raise the necessary capital.  He also said he was not anxious 
to assume leadership of the government, but preferred to 
remain in opposition until after the May 2010 municipal 
elections to benefit candidates from his party. 
 
Increased Bilateral Cooperation with the U.S. 
--------------------------------------------- -- 
¶5. (C)  Benediktsson also hoped to discuss with the White 
House ways to promote bilateral discussion and cooperation 
between the United States and Iceland.  He said that when the 
U.S. withdrew from the Keflavik Air Base in 2006 it created a 
public perception that the relationship between Iceland and 
the United States was deteriorating.  This perception, he 
suggested, has only been enhanced with Iceland's recent 
application to join the European Union.  Benediktsson 
acknowledged that the Strategic Dialogue allows for annual 
high level meetings between U.S. and Icelandic government 
officials.  He felt, however, that even more dialogue was 
necessary.  Benediktsson was somewhat vague with suggestions 
on how to accomplish this but suggested that the Parlimentary 
 
REYKJAVIK 00000203  002 OF 002 
 
 
Foreign Affairs Committee visit the United States.  He then 
asked whether, considering Iceland's current financial 
problems, there might be some U.S. financing available to 
facilitate such a trip.  (Note: Benediktsson later sent CDA a 
follow up email expressing continued interest in meeting with 
an official from the White House even if he came alone. End 
note.) 
 
¶6. (C)  Comment:  Benediktsson continues to seek a meeting 
with a high-ranking  White House official to discuss 
increased cooperation and the IMF vote even though IMF board 
review vote is long past.  His request may be a political 
ploy designed to embarrass his opponents in the government 
and make waves in the media.  On the other hand, it could 
also fit into the agenda of his Independence Party, an 
organization which has traditionally supported strong ties 
with the United States and fiercely opposes Iceland's 
application to join the EU.  Given his proposed solution on 
Icesave, namely send it to the courts, his angle appears more 
likely political than economic.  End comment. 
WATSON