Foreign Policy For Profit

Last week, the Russian government announced they would respond to Western sanctions over the situation in the Ukraine with some economic sanctions of their own—a full embargo on food imports from the EU, the US and several other Western countries. Norway, which is on the list of embargoed countries, is hit especially hard, Russia being the single most important market for Norwegian seafood exports last year.

Immediately, many Icelanders exclaimed that this was great news!

Fish exporters seemed especially happy, because—for some reason—Iceland was not included on the embargo list. The funny thing was, nobody knew for certain why.

A bureaucratic oversight?

There was no immediate explanation. Speculation abounded. Norwegian commentators wondered whether the Russians wanted to maintain a trading partner to provide them with access to Western markets. Others theorized that Putin perhaps felt Iceland too small and insignificant to mention? Perhaps he had simply forgotten about Iceland, its absence from the list but a bureaucratic oversight?

Internet commenters howled and screamed in anger when Katrín Jakobsdóttir, chair of the Left-Greens, mentioned in a television interview that it was important to get answers to this question. What was she trying to do, remind Putin he had forgotten to blacklist Iceland? Had leftist hatred of private enterprise finally driven her mad enough to demand Iceland be added to the list? Why didn’t she petition Obama to go bomb Iceland along with ISIS in Iraq, while she was at it?

As if public debate about why Iceland had not been included in the embargo might tip Putin off.

Most Icelanders, however, suspected the real reason for Iceland’s omission from the list were the diplomatic efforts of one President Ólafur Ragnar Grímsson.

Or: A personal foreign policy bet paying off?

According to the Icelandic constitution, the office of the president is purely a ceremonial one—the president wields no formal power. Ólafur Ragnar has spent his presidency trying to change this, especially when it comes to the international stage.

Critics have blasted Ólafur Ragnar for meddling in Icelandic foreign policy and for cosying up to undemocratic strongmen and human rights violators. Ólafur Ragnar has, in turn, argued that Icelandic interests are best served by seeking closer ties with rising industrial powers, especially China, India and Russia.

The president’s friendly relationship with Russia and Putin have irked critics the most.  In February, he declared in an interview with a Russian newspaper that St. Petersburg was “the Capital of the Arctic Region.” When foreign heads of government and ministers refused to attend the Sochi Winter Olympics, in protest of Russian human rights violations and anti-gay legislation, Ólafur Ragnar paid Putin a visit, to reaffirm the good relationship he had built between the nations. This spring, Ólafur Ragnar censured the Norwegian State Secretary for criticizing Russian action in the Crimea at a conference about Arctic policy.

“When foreign heads of government and ministers refused to attend the Sochi Winter Olympics, in protest of Russian human rights violations and anti-gay legislation, Ólafur Ragnar paid Putin a visit, to re-affirm the good relationship he had built between the nations.”

Foreign policy basics

While some feel it makes no sense for the president of Iceland to side with Russia against our Nordic brethren and criticize him for inflating the power of the presidency by meddling in foreign policy, his personal efforts are firmly grounded in Icelandic political tradition. In fact, it they are an attempt to re-capture the central essence of Icelandic foreign policy during the Cold War: Foreign policy for profit.

Throughout the Cold War, Icelandic politicians did their best to leverage Iceland’s strategic position in the middle of the Atlantic into favourable trade deals that would bring cheap oil and access to profitable export markets for herring and frozen fish products in the Soviet Union and the US. During WWII, Iceland had discovered that great power conflicts could be a huge boon to small nations that played their cards well. Exporters had reaped a windfall during the war, and due to its strategic location, Iceland still received the largest Marshall Plan aid package of any war-torn nation, per capita. After the onset of the Cold War, Icelandic politicians sought to play both sides by keeping open the possibility of leaving NATO and kicking out the US military base. Thus, Icelandic politicians were able to profit from international tension.

The end of the Cold War and the departure of the US military meant the death of this policy. Some believe the answer is to join the EU, that Iceland should align itself with those nations with which it has its closest historical ties. Ólafur Ragnar’s foreign policy rejects this premise. Instead, he feels Iceland should seek new allies who might be interested in closer cooperation with Iceland.

Until now, Ólafur Ragnar has had preciously little to show for these efforts.

It remains to be seen whether Icelandic exporters really profit from having privileged access to the Russian market, and whether Putin will collect on this act of friendship.

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Magnús Sveinn teaches economic history at the University of Bifröst.