Iceland At A Crossroads

A shifting world order presents Iceland with the opportunity to forge a new path (or not)

When this magazine finds its way into the shops, cafés and cultural institutions of Reykjavík, it will have been a mere 46 days since the inauguration of President of the United States of America Donald J. Trump. While tradition dictates the analysis of a politician’s first 100 days in power, the Trump administration’s approach to foreign policy in a short span of time has spurred daily analyses, with the world press devoting copious column inches to deciphering the to-the-minute musings and maneuverings of the U.S. president.

Which longtime ally will he spurn next? Who will be slapped with the next tranche of tariffs? Is he really going to invade Greenland?

As Canadian Prime Minister Justin Trudeau said in a press conference on March 4, after his American counterpart sung the praises of Russian President Vladimir Putin one moment and launched a trade war against America’s closest ally and trade partner the next: “Make that make sense.”

While the growing stack of Mr. Trump’s executive orders has already enacted significant sweeping change throughout his own country, the list of the Trump administration’s actions on the world stage has begun to pull at the thread of a tapestry of global stability and world order that has been woven over the course of the past 80 years.

Situated at the crossroads of the North Atlantic, Iceland’s geographic location has made it a pivotal player in global geopolitics, particularly during the Cold War.

“The European Union was formed in order to screw the United States,” Mr. Trump said from behind his desk in the Oval Office of the White House on Feb. 26 while being asked about tariffs he is considering placing on exports from the bloc.

“We need Greenland for national security and even international security … And I think we’re going to get it one way or the other. We’re going to get it,” the president said in his March 5 address to the U.S. Congress. The comments were his latest staking claim to the autonomous Danish territory, which have included previous remarks about Denmark being “unfriendly” if it didn’t capitulate to the United States’ claim on the arctic island, and refusing to rule out sending military forces to make it happen.

“I think he’ll keep his word. I’ve known him for a long time now, and I think he will. I don’t believe he’s going to violate his word,” Mr. Trump said Feb. 27 about Putin and his conversations with the Russian president about signing a ceasefire agreement with Ukraine.

It’s no wonder High Representative of the European Union for Foreign Affairs and Security Policy Kaja Kallas posted to social media on Feb. 28, “The free world needs a new leader.”

With the United States apparent expansionist aims, heightened global interest in the Arctic, and Mr. Trump’s growing disregard for both NATO and the alliance-first foreign policy forged by prior administrations, the future can feel uncertain. It’s high time Iceland determines where it will stand.

A special relationship

The historic relationship between Iceland and the United States has long been defined by strategic necessity, mutual benefit and occasional tension. Situated at the crossroads of the North Atlantic, Iceland’s geographic location has made it a pivotal player in global geopolitics, particularly during the Cold War. The U.S. established a military presence in Iceland during World War II, a partnership that solidified during the Cold War as both nations sought to counter Soviet influence. The Keflavík Air Base, operational until 2006, served as a critical link in NATO’s defense strategy, highlighting Iceland’s strategic importance despite its small size — and lack of its own military.

The base was a grey zone, where the boundaries between domestic legislation and extra-territoriality were blurred.

Beyond military ties, the relationship between the two countries has expanded into trade, diplomacy, and cultural exchange. Though Iceland has often diverged from the U.S. on policy issues, strong ties have been maintained between the two nations. The United States is one of Iceland’s biggest trade partners, with the States’ importing $1.1 billion USD worth of Icelandic goods in 2024.

“The 1951 U.S. – Icelandic defence agreement was a Cold War construct and part of the U.S. global military base system established after World War II,” explains Valur Ingimundarsson, a professor of contemporary history at the University of Iceland, who has written extensively on the military relationship between Iceland and the United States. “It gave the U.S. exclusive military rights in Iceland — in peace and war.”

What that means, according to Valur, is that even if Iceland were to repeal the defence agreement, it would still be required to grant the U.S. access to the military facilities that it had previously enjoyed in the case of an attack on a NATO member.

“Thus, the agreement was far broader in scope than the North Atlantic Treaty itself, on which it was based,” Valur elaborates. “Its wording also exposed tension between idealistic ideas about sovereign rights and an awareness of their limitations in practice.”

“On the one hand,” Valur notes, “it stated that nothing could be interpreted as infringing on Iceland’s control over its own affairs. On the other, it conceded that Icelanders could not protect their own territory and that the lack of defence threatened Iceland’s security and that of neighbouring states. The outsourcing of military defence to the U.S. was, thus, justified on the basis NATO’s collective security interests — even if it was a bilateral agreement.”

The U.S. was not only given access to certain areas and control over their own troops; they were also given exemptions from various national laws.

The enforcement of the agreement — a hot button issue in Icelandic politics during the Cold War — required significant attention when U.S. troops were stationed at the Keflavík base from 1951 until 2006.

“The U.S. was not only given access to certain areas and control over their own troops; they were also given exemptions from various national laws.” Valur says. “Thus, the base was a grey zone, where the boundaries between domestic legislation and extra-territoriality were blurred.”

Even after the base was shuttered in 2006, the agreement between the two nations left the U.S. largely responsible for Iceland’s defence. Though Washington ceded joint control of the Keflavík base, Valur explains that it maintained a listening post in Grindavík, the village on the south coast of the Reykjanes peninsula that was famously evacuated toward the end of 2023 amid a violent earthquake swarm that has since been followed by a series of nearby eruptions.

That’s not to say that Washington’s presence in Iceland has been limited to a singular post since 2006. The United States has taken part in NATO exercises out of Iceland in the interim, along with other alliance members. In 2016, a joint declaration was issued by Reykjavík and Washington as Russia increased its military presence along the demarcation line of Crimea (which Russia had annexed in 2014) permitted the U.S. to resume use of the facilities in Keflavík.

“This paved the way for increased rotational deployments of American troops to take part in anti-submarine warfare operations from Iceland,” Valur explains. “It was followed up by a bilateral agreement in late 2017, which provided for U.S. access to airfields, ports and other places within Iceland as well as to ‘operating locations,’ which had been returned to Iceland when the United States closed down the base [in 2006]. These measures signified a new phase in the relationship with the U.S., which gradually led to the resurrection of the Keflavík base in all but name.”

That new relationship was also marked by the Icelandic government in 2023 authorizing nuclear-powered U.S. submarines to make service visits and to replace crews off the coast of Iceland — a first in the history of the military relationship between the two nations.

Not all is quiet on Reykjanes’ western front today. The United States military is currently bankrolling a massive new military supply depot within the footprint of the base, signalling an uptick in activity in the near future.

How do Iceland’s military entanglement with the United States and membership in NATO — which the Icelandic government characterises as “the two main pillars of Iceland’s security policy” — function simultaneously now that the United States is in a second, non-consecutive term of leadership under a commander in chief expressing outward disdain for the military alliances formed in the ashes of the Second World War?

“Trump’s imperialist and neo-colonial foreign policy rhetoric — as exemplified by threats to take over Greenland, the Panama Canal and Canada — and his critical views of NATO Allies, have so far not targeted Iceland,” Valur notes. “Yet with a president bent on questioning core premises of the international liberal order, which the United States was, ironically, responsible for creating and guarding since World War II, there are bound to be repercussions in Icelandic foreign security policy.”

New policy, who dis?

Any new foreign policy explored by the coalition government elected in November 2024 would very likely align with the ruling parties’ interest in strengthening Iceland’s ties with the European Union. Iceland is a member of the European Economic Area (EEA) and, along with Norway, Lichtenstein and Switzerland, rounds out the European Free Trade Association (EFTA), but it is not a member of the European Union.

“Previous governments have not at all been in favour of Iceland’s involvement and closer European integration, and they had emphasised the defence and security lead of Washington,” says Baldur Þórhallsson, professor in political science and Research Director of the Centre for Small State Studies School at the University of Iceland. “They didn’t want to compromise it by pursuing closer security ties with the EU. But from my point of view, it’s important to change this policy and work closer with our European partners.”

If Iceland were to formally join the EU, it will have been a long time coming, marked by starts and stops. In 2009, in the wake of Iceland’s devastating financial collapse and saddled with a deeply devalued Króna, a coalition government of the Social Democratic Alliance and the Left-Green Movement applied for membership to the European Union. Talks were ongoing for the years that followed until 2015, when, under an Independence Party – Progressive Party coalition government, the plug was unilaterally pulled on talks with the bloc. In fact, Progressive Party MP and then foreign minister Gunnar Bragi famously sent a letter to the EU negotiating team expressing Iceland’s disinterest in continuing accession talks — a decision he didn’t bother running by Alþingi.

While euroscepticism has reigned since, the current coalition, composed of the Social Democratic Alliance, Liberal Reform Party and People’s Party, pledged upon its formation to hold a public referendum on joining the bloc by 2027.

That’s a timeline that Dagur B. Eggertsson, Social Democratic MP and chair of Iceland’s NATO Parliamentary delegation, expressed in early March he would like to see expedited in light of the shifting geopolitical world order. “It is clear that this situation is evolving rapidly and could have significant consequences. We need to monitor it closely, but there is a sense that we do not have a direct seat at the table,” Dagur told Iceland’s national broadcaster in the days following a meeting of European leaders in London.

Previous governments have not at all been in favour of Iceland’s involvement and closer European integration, and they had emphasised the defence and security lead of Washington.

The 2025 London Summit on Ukraine was held on March 2 as a forum for international leaders to come together and draft a peace plan for the Russian invasion of Ukraine to take to the United States. It took place just two days after President Volodymyr Zelenskyy of Ukraine met with Mr. Trump in the White House, where he was chastised for his perceived lack of gratitude for U.S. aid over the course of three years of war that erupted when Russia invaded. Mr. Trump was also pushing for Mr. Zelenskyy to sign an agreement to repay the U.S. aid through granting 50% of future proceeds from state-owned mineral resources, oil and gas to Washington. As of publication time, no agreement had been signed, though Mr. Zelenskyy has signalled his willingness to resume negotiations.

Most troubling, however, was Mr. Trump’s insistence in that ill-fated meeting and ever since, that Russian President Vladimir Putin was a trustworthy ally and dedicated to peace in the region — despite his nation’s history of repeatedly signing and breaking ceasefire agreements with Ukraine. Mr. Trump has since suspended military aid to Ukraine and ceased sharing intelligence with the war-battered nation.

Dagur’s interest in exploring stronger ties with Europe is in line with public opinion in Iceland. Polling by Prósent published in early January, but based on polls conducted in December 2024, suggests that 58% of the population was in favour of a referendum on whether Iceland should resume negotiations with the EU at that time. A lot has happened in the interim.

Time to look East

Iceland’s need for stronger ties with Europe is something Baldur agrees with — though he’s also a proponent of strengthening and maintaining partnerships with Washington.

“If you look at it from the small state perspective, it would, of course, be in our best interest to be part of the organisation, to have a seat at the negotiation table, to sit with the European Leaders within the European Union and take part in decisions,” Baldur says. “Regarding security and defence and all other related matters, this can only be accomplished by full membership in the European Union. That is, of course, the way that most small states in Europe have gone — if you have an associated relationship, like Iceland, you are never a full partner.”

Baldur points out that Iceland is already far more aligned on policy with the EU than many people may realise. Whenever the European Union puts out foreign policy declarations, the EEA member states — including Norway, Iceland, Switzerland and Lichtenstein — are offered to take part in these declarations,” he says. “Iceland almost always takes part in these declarations … This means Iceland follows the EU’s foreign policy lead, because Iceland and the EU have similar, or if not the exact same, foreign policy goals.”

The problem, then, from Baldur’s perspective, is that Iceland has been adopting EU policy without actually having a voice or a seat at the table to influence policy. At the same time, Iceland’s defence agreement with the United States puts it in a position of having the military protection of America without having much in the way of bargaining power to set boundaries or limits.

Baldur is hesitant, however, to write off the United States as yet — even as Washington eyes expansion into the North Atlantic.

If you look at it from the small state perspective, it would, of course, be in our best interest to be part of the organisation, to have a seat at the negotiation table, to sit with the European Leaders within the European Union and take part in decisions.

“As I read the situation, the geographical location of Iceland places it in a bit of a different situation,” he says. “Trump’s interests in Greenland are both of a defence and economic nature. With regard to Iceland, this has more to do with security and defence — Iceland is still important for the defence of the United States when it comes to defending the North Atlantic. And here, I think the administration or policy makers in Washington are noting the long term future and a potential rivalry with China in the Arctic and North Atlantic. That’s why I think the Defence and Security relations are still intact.”

Chinese investors have long been attempting to buy up large swaths of land in Iceland, only to be denied by whichever government is in Alþingi at the time. While Beijing maintains investor interests lie in tourism and geothermal knowledge sharing, it is no secret the nation has been working actively to insert itself in Arctic governance and affairs, despite not currently claiming any Arctic territory.

China’s interest in the Arctic aside, Baldur argues that the real concern is Russia: “I would say that the risk to Iceland comes from Russia. We are vulnerable to Russian sabotage, and the main risks are associated with cyber attacks and the possibility that something is going to be done with our sea cables,” he explains. “For some reason the Trump administration completely sidelines the potential Russia threat.”

Targeting submarine cables in times of global conflict is a trend with a long history, and a practice that has been making headlines in the years since Russia’s invasion of Ukraine. In addition to increased NATO focus on the security of submarine natural gas infrastructure, Russia’s global posture over the past years has seen the attention of western governments turn to the security of their submarine telecommunications cables. The globe-spanning network of more than 420 submarine communications cables measure more than 1.3 million kilometres and carry more than 90% of the world’s internet traffic.

In Iceland, it’s closer to 100% — damage to the cables connecting Iceland to the world would see the country booted back to the dial-up era.

Looking ahead

Foreign Minister Þorgerður Katrín Gunnarsdóttir has promised to develop a new Icelandic defence policy, and while Baldur agrees it’s high time Iceland has its own strategy and to map out how we would like our defence policies to look, Valur argues “in view of the aggressive, disruptive, and unpredictable behaviour of the Trump Administration, it will be extremely difficult to carve out a credible defence policy of an unarmed country, which is military dependent on the U.S.”

He is concerned that Iceland’s strategic location and its proximity to Greenland mean the Trump administration will steadfastly retain its military interest in Iceland.

“I would say Iceland needs to do three things,” Baldur says. “It needs to strengthen its relations with Washington — it needs to keep the relations intact. Secondly, we need to work closer with the other Nordic states on security and defence. Thirdly, we need to take a much more active role in the EU’s foreign policy initiatives and get a seat at the table.”

Though Baldur emphasises the need for Iceland to forge a new path, he concedes the country is not in a strong negotiating position when it comes to the United States. “If the United States wants to leave the security agreement, they will do it,” he concedes. “And if they want to start a military buildup in the security zone, they can and will do that. They have been allowed to do so, even under the leadership of the Left-Greens in Iceland. So Iceland is, of course, not in a strong position.”

Even if Iceland would seek to establish far deeper security partnerships with other European NATO countries, such as the Nordics, in an attempt to extricate itself from its relationship with the United States, Valur says there would be “no guarantee of success because of the broader geopolitical complications involving U.S.–European relations and NATO.”

Guaranteed success or not, big swings will need to be taken by policy makers in Alþingi — and fast — lest Iceland simply be co-opted by whichever global power acts first and most aggressively. Now, as long-standing global alliances fray and a new world order appears to be taking shape in real time, Iceland is in a unique position to change its course, enact greater self-determination when it comes to defence and security, and decide where its future allegiances lie.