Iceland

Facts & Figures

AC member since 1996

Coordinates Reykjavík:
64.1265° N, 21.8174° W

Population 332,000

Land Area 103,000 km2

Arctic Coastline 4,970 km

The majority of Iceland’s land mass sits just south of the Arctic Circle, with only the small island of Grímsey located partially inside the Arctic Circle. The country’s physical landscape is a mix of barren fields, rich agricultural lands, and stark peaks. The high amounts of precipitation and generally warmer weather than other areas at its latitude is due to its place in the Atlantic Ocean’s Gulf Stream. Average annual precipitation ranges from 400 to 4000 mm, with averages of 3000 mm on the south coast of the island.

Iceland, an island country in between the North Atlantic and Arctic Oceans, sits atop the northern Mid-Atlantic Ridge. Its position on the Ridge results in extensive volcanic and geothermal activity. Most of the country is a recently created mountainous lava desert, with the highest elevation at 2,110 meters (6,923 feet) above sea level. Just over 10 percent of the island is covered by glaciers, though these are now rapidly retreating due to climate change. Most of Iceland remains undeveloped, with the vast majority of its population residing in a ring along the coast. Twenty percent of the main island is used for grazing, while one percent is cultivated. The majority of Iceland’s population resides in four cities: Reykjavik, Kópavogur, Akureyri, and Hafnarfjörður. Residents of these four cities account for 60 percent of the country’s entire population.

Despite only having a population of 332,000, in 2014 almost a million people visited the island. While a significant boom to the Icelandic economy after the 2008 Icelandic financial crisis, this tourism has brought environmental concerns with it. The government of Iceland, the tourism industry, and a growing body of academic researchers have dedicated much time, thought, and energy in ensuring that nature conservation efforts are not jeopardized by such a large increase in annual visitors. Building tourist infrastructure, developing wilderness areas, damaging moss-covered geographies, and the breaking of recent volcanic features are just a few examples of the potential for tourism’s negative impact on Iceland’s environment.

Increased energy production of from hydroelectric and geothermal sources has also put pressure on Iceland’s natural landscape, demanding more dams to be built across streams, rivers, and estuaries and wilderness to be reclaimed for geothermal plants. Geothermal plants emit hydrogen-sulphide, which is both corrosive and toxic. Hydrogen sulphur does not necessarily lead to any specific diseases; but it does cause complications for those already suffering from serious illness. While it does not It must be acknowledged that Iceland’s dedication to renewable energy sources has made it a global leader in clean energy and one of the lowest energy sector greenhouse gas emitters. However, Iceland has seen an increase since 1990 in its greenhouse gas emissions from its industrial and transport sectors.

Iceland also has significant issues of soil erosion and desertification due to its high content of volcanic ash. Today nearly one third of the country is desert, though when the Vikings first settled the island it was lush with trees, shrubs, and grass. The introduction of sheep, deforestation, and human settlement by Iceland first settlers, in addition to frequent volcanic eruptions, glacial river floods, and katabatic winds, has led to the landscape of ice and fire that Iceland is known for today. The Icelandic government has taken action against soil erosion and desertification since 1895, and has established the Soil Conservation Service of Iceland to combat desertification and promote sustainable land use.

The health of the ocean is of great importance to Iceland as an island nation. Therefore, Iceland imbues great importance into maintain a healthy ocean environment and to ensure sustainable utilization that that the ocean can continue its use as one of the core sectors of Iceland’s economy. Iceland bases its ocean management and conservation on the UN Law of the Sea; the concept of sustainable development, and the view that responsibility for the conservation and utilization of marine ecosystems is best placed in the hands of those states directly affected by the decisions taken and with the greatest interests at stake. Perhaps the largest environmental marine issue for Iceland is the sustainable harvesting of fish and other living marine resources. The alleged overfishing of mackerel in large part led to Iceland withdrawing its European Union application and further disputes between the continental Europe and Iceland over fishing.

Iceland became an independent republic from the Danish monarchy in 1944 after nearly six centuries of colonial rule. The original settlement of Iceland began in the late 9th Century, perhaps 874, by Norse settlers  who migrated from Scandinavia because of civil strife and a shortage in arable lands. Though there is archeological evidence to support that Gaelic monks from a Hiberno-Scottish mission were there in the 8th Century; however, the Norse vikings were the first to bring sustained, growing communities to the island. By 930, the majority of arable land in Iceland was already claimed and the world’s first parliament was formed. From DNA sampling today, the native population of Iceland can be traced to those of Ireland, Britain, and Scandinavia. Because of their relative isolation throughout history and small founding population, Icelanders are highly genetically homogeneous and have been the subject of much genomics research.

Icelandic culture and language are strongly derived from Norse tradition. The Icelandic language, unique to the island and a direct descendent of Old Norse, is the basis for a rich culture of writing, particularly Sagas, poems, and ancient literature. Njáls saga, a saga about an epic blood feud, and Grænlendinga saga and Eiríks saga, describing the discovery and settlement of Greenland and Newfoundland, are among the most popular and still told today. By some accounts, Iceland has more writers, books published, and more books read per capita than anywhere else in the world. Traditional crafts such as silversmithing, weaving, and wood carving are, among folk song and dance, widely practiced.

Just over 320,000 people live in Iceland today, and 93 percent of the population is Icelandic. Nearly 90 percent of the entire population lives in urban areas, with 60 percent living in the capital region of Reykjavik. Iceland inhibits a strong traditional liberal Nordic outlook similar to Norway and Sweden, and consistently ranks high for measurements for quality of life in surveys like the United Nations Human Development Index. Icelandic society has a high degree of gender and marriage equality, with a strong legal system to support child protection and women’s rights. Because of their historic isolation, Icelanders value independence and self-sufficiency, not only seen in their society but in their economy and national policies.

Today Icelanders are by and large Lutheran with other Catholic and Christian minorities existing. While many people identify as Christian, over forty percent of the population considers themselves to be non-religious or convinced atheist. Even though many Icelanders identify as Christian, there is still some belief in Icelandic folklore, such as Huldufólk, hidden people who live in rocks.

Iceland’s economy is based on a social-market framework with a Nordic welfare system. The major sectors of Iceland’s economy are fisheries, manufacturing, and tourism. Fisheries are the largest and most important sector of Iceland’s economy, accounting for 40 percent of export earnings and roughly 27 percent of total GDP. By some estimates, ocean livelihoods account for 20 percent of the workforce, and include fishing, fish processing, and technological companies included in equipment manufacturing and biotechnical production. Cod makes up the majority of Iceland’s harvest, with the 2015 quota set at 239,000 tons. With the introduction of the quota system, Icelanders have moved to supplementing cod in processing with blue whiting. As the Atlantic Ocean warms due to overall warmer seas from climate change, the Atlantic mackerel has moved into Iceland’s national waters and fishermen have in turn harvested more mackerel, which has led to considerable political turmoil with the European Union.

Because of Iceland’s geothermal and hydroelectric energy sources, power-intensive industries have become a strong component of Iceland’s exports. Manufactured products constitute roughly 35 percent of all merchandize exports, the most important of these being Aluminium smelting. There are currently three plants in operation in Iceland, placing it 11th among all aluminium producing nations in the world. Rio Tinto Alcan has been operating the first aluminium smelter since 1969 at a capacity of 189,000 mtpy. Nordurál, a wholly owned subsidiary of U.S.-based Century Aluminum Company, owns the second smelter and US-based manufacturer Alcoa runs the third. Future smelting operations have been identified to expand the industry, including a jointly proposed smelter in the Northwest of the country by an Icelandic and Chinese company.

Tourism in Iceland has grown substantially over the past 15 years, accounting for over five percent of total GDP in 2015. A large part of the revenue from tourism comes from airfare, with other revenue generated from hotels, restaurants, and other service providers. Each year over one million people visit Iceland, with more projecting to continue in the future. Tourism was an important sector of economic growth during the 2007-2011 financial crisis, helping the country move past its recession.

Because of its small size, Iceland’s economy is vulnerable to high volatility and has been the subject of much research and media surrounding the financial crisis of 2007-2011. In late 2008, all three of Iceland’s major privately owned commercial banks defaulted from difficulty refinancing short-term debt. Its systemic banking collapse was the largest experienced by any country in economic history and led to a severe depression and considerable political unrest, the legacy of which can still be seen today. The national currency, the Icelandic Króna, fell sharply in value and the stock exchange fell by more than 90 percent. Unemployment more than tripled in 2008, and in the years following the bank failures, GDP dropped by 10 percent in real terms. The effects of Iceland’s financial crisiWhile it continues to actively explore for oil, it has not yet s were not only felt inside the country, but also internationally, particularly from UK and Denmark investors who had millions of dollars in cash invested in Icelandic banks. In the heights of the crisis, one to two percent of the population was protesting the banks and government reaction in Iceland’s capital. In 2009, both the Prime Minister and Commerce Minister resigned, and there have been a number of special investigations and court cases leading up to today. Iceland began to recover in 2011, posting its first growth in mid-2011 since the bank failures. The recovery of Iceland from the financial crisis is seen as a success in the larger European financial crisis and continues to diversify its economy beyond international finance. It is to be seen what the wider implications of the Panama Papers will be for the Icelandic economy, though Prime Minister Sigmundur David Gunnlaugsson has already offered his resignation amid the controversy over his offshore holdings.

Beyond its financial crisis, Iceland has had some economic disappointments, particularly in the potential of its offshore hydrocarbon resources above the Arctic Circle. Iceland continues to search for oil, but it has yet to move forward beyond exploration. However, Iceland has the potential to growth in software production, biotechnology, and data storage through its geothermal energy in the years to come.

Iceland has been a member of the Arctic Council since it was established in 1996. The Icelandic chairmanship from 2003-2004 saw the launch of the Arctic Climate Impact Assessment (ACIA) and the Arctic Human Development Report (AHDR). Two AC working groups—CAFF and PAME—are currently based in Akureyri in northern Iceland. Nordic cooperation is likewise an important strand for Iceland’s foreign policy and is centered on several regional frameworks, including: the Barents Euro-Arctic Council (BEAC), the Council of Baltic Sea States (CBSS) and the EU’s Northern Dimension. Furthermore, Iceland is a member of NATO, belongs to the European Economic Area (EEA), and has ratified the Law of the Sea Convention on 28 July 1995.

In terms of Arctic policy, the Alþingi (Iceland’s parliament) published A Parliamentary Resolution on Iceland’s Arctic Policy which was approved in March 2011. This document contains twelve principles emphasizing, among other things, the importance of securing Iceland’s position as a coastal state within the Arctic region and the improvement of the socio-economic conditions for residents of the Arctic and their communities through access to sustainable development. That Iceland was not invited to several meetings of the Arctic 5 (the arctic littoral states) has ruffled some feathers in Reykjavik.

Despite having a semi-militarised coast guard, Iceland lacks its own armed forces. In 2006, the United States’ Armed Forces announced it would leave Iceland and dismantle the US Iceland Defence Force operating out of Keflavik Naval Air Station that had been present since 1951. Iceland was thus left with a security predicament. From 2007 onwards, Russia started showing more assertive military behaviour in the North Atlantic, particularly with Cold War-style missions with Russian long-range bombers aimed at reasserting Russian long-range strike capabilities. This highlighted the strategic role of Iceland, in the so-called GIUK-gap (Greenland, Iceland, UK) and as gatekeeper (geographically) to the North Atlantic and North American East Coast.

Since 2008, NATO has taken over the responsibility of Iceland’s defence and air policing. A range of NATO-allies have contributed, including France, Portugal, Canada, the US, and Germany. From 2013 NATO re-termed the Icelandic mission as “Airborne Surveillance and Interception Capabilities to meet Iceland’s Peacetime Preparedness Needs.” In 2013 non-NATO members Finland and Sweden also joined the air policing mission, albeit outside of the NATO-framework. Instead, they participate under the umbrella of the Nordic Defence Cooperation (NORDEFCO), together with Denmark, Norway, and Iceland.