Ambassadors Archive 2

Iceland: A Resilient People


Interview with Ambassador Hjalmar W. Hannesson

By Alan Dessoff

Most people, certainly in much of Europe and North America, are familiar with Iceland these days largely as the location of the volcano Eyjafjallajokull, which caused widespread havoc for international travel when its eruption in April spewed an ash cloud that forced airlines to cancel flights and strand travelers around the world.

But as Hjalmar W. Hannesson, Iceland’s Ambassador to the US, points out from a historical perspective, another volcano, Katla, also bears watching. Each of the three times in recorded history that Eyjafjallajokull has erupted, the larger Katla has done the same. Katla is a more active volcano and “sometimes has a big eruption, sometimes small. But nothing indicates this will happen now,” says Hannesson, adding that “everything is under control and we are prepared for eventualities, so no one is in danger. This is what you have to do when you live very close to nature, and live off nature, as we do.”

Straddling a seam in the earth’s crust, Iceland is always vulnerable and the latest eruption is “just an indication that Iceland is still in the process of being made,” Hannesson says. But Icelanders are “resilient people who have learned to live in harmony with the forces of nature,” he declares.

They have been living that way since 874, the start of the island nation’s recorded history, when it became the last European country to be settled, mostly by “chieftains who fled from Norway because the King of Norway was consolidating his powers,” and rather than become subservient to the King, they decided to leave for Iceland, Hannesson explains. They also came from elsewhere in Scandinavia and from Viking settlements in the British isles, bringing a Celtic element with them.

Irish monks had come to Iceland even before 874, seeking solitude and contemplation, but they fled or were killed when the Vikings arrived. In another link with Ireland, “the Vikings took beautiful women with them to Iceland,” and now, through modern comparative DNA studies of Norwegians and Icelanders, it is calculated that a third of the original mothers in Iceland were Irish, Hannesson says. By 930 most of Iceland’s population of 70,000 had arrived in their new country this way, but the culture was only built on the Viking heritage, he says. Now the population is about 317,000, with about two-thirds in or around the capital of Reykjavik, far from volcanoes.

One thing the original Viking settlers found, Hannesson relates, was that “it was not very practical to have no government.” So they started a parliament, but no executive branch, leaving it up to individual chieftains around Iceland to implement the laws the parliament adopted. “That was a big weakness of the system,” Hannesson says, but the parliament — the Althing — survived, and today is the world’s longest continuously serving legislative body. Iceland is a republic with a written constitution and a parliamentary government where the power rests with a Cabinet that sits at the majority will of the Althing, which in turn is elected in a proportional electoral system. There usually are at least four or five national political parties. A ceremonial President is elected as head of state by direct popular vote for an unlimited number of four-year terms. A Supreme Court and district courts exercise judicial power.

Not much was known about Iceland generally in the Anglo-Saxon world for many centuries, until the masterful Icelandic medieval Sagas and the Eddas were translated — the word “saga,” commonly used in English today, was originally an Icelandic word — and told of the country’s early history, its heroes, and their Viking explorations to Greenland, Vinland (North America), Russia and elsewhere. The Eddas depict the ancient world of the Vikings, their gods and philosophy. Another word in English from Icelandic is “geyser,” from the (great) Geysir that spews hot water high into the air.

The Icelandic language today has changed very little from the old Viking language that was spoken in all Scandinavian countries and parts of England, Normandy and elsewhere until about 1000, Hannesson says. “It is a difficult, old-fashioned language,” he acknowledges. All Icelanders speak a second and a third language, most commonly “Scandinavian,” a mix of Danish/Norwegian/Swedish, as well as English, which children learn in schools from the age of ten, with reinforcements from computers, movies and television. But “we do not open our language to foreign words,” Hannesson says. “Our mission in life as a small nation is to preserve our culture, and the language is at the core of any culture.”

While Icelanders are proudly committed to that, they also have had to adjust to modern circumstances, most notably a recent economic crisis similar to what happened in the United States during the same period.

It’s “a very complex issue” that began when Iceland’s three major banks were privatized, Hannesson says, then expanded at “an extremely fast pace” while regulatory authorities could not keep up. By 2008, he says, the three large banks, constituting about 85 percent of Iceland’s banking sector, had grown to 10-12 times the country’s gross domestic product. A year earlier, according to United Nations statistics, Iceland topped all other countries as “the best place to live for quality of life,” based on indicators like healthcare and income. “Everything was going extremely well,” Hannesson says.

But it turned out, he recounts, that “the financial tycoons and banking directors were prone to extreme risk-taking,” and when Lehman Brothers collapsed in the US in 2008 and the international liquidity crisis ensued, the banks in Iceland quickly experienced major liquidity problems and “everything came down, very quickly.

The government took over the three banks and new “good” banks were established. Since then, two of them have been taken over and are operated by their creditors, mostly foreign. The stock in the three old banks became worthless at the time of the banking crash and “a lot of people are angry after what had to be done in order to keep the economy going,” Hanesson says.

A government-established commission —some Icelanders call it a “truth commission,” like the Truth and Reconciliation Commission formed in South Africa after the abolition of apartheid — produced a 2300-page report that reviewed every detail of the economic crisis, blaming bankers, a regulatory system that did not keep pace, and some government officials and ministers for their inaction. Bankers were recently put into solitary confinement in jail for questioning because there is suspicion that some of them and some big investors transferred wealth to tax havens, Hannesson says. “Many hope that they will not be able to enjoy it because they almost ruined the country. People feel that this money should be brought back to Iceland to help rebuild the economy,” he says.

Meanwhile, with support from the International Monetary Fund, “things are looking up,” Hannesson says, although Iceland still has 9 percent unemployment (up from almost 0 in 2007) and a “too high” 8.5 percent inflation rate. But “our exports are really moving,” because Iceland’s currency, the krona, at about 62 per dollar in October 2008, is now about 126 per dollar, “which means everything is half-priced, compared to what it used to be, for foreigners with their currency,” Hannesson explains. But at the same time, “because of the devaluation of the krona to this extent,” foreign products are expensive to buy and imports have declined drastically, he adds.

Iceland has applied for membership in the European Union and “a lot of people say that if we had been a member, and had been in the Euro zone without our independent currency, we would have had more stability. The krona was the smallest independent and free floating currency and therefore was vulnerable,” Hannesson says. Still, he continues, the IMF and the international marketplace believe Iceland has a strong long-term economic foundation. Icelanders are a young nation and their work force is highly educated, trained, and very flexible, he says.

“We are a fishing nation second to none and we utilize the resources of the sea in a sustainable manner. We have some of the most fertile fishing grounds of any country in the world” and Icelandic fishermen — about 4,000 of them out of the population of 317,000 — are “by far the most productive” in the world, Hannesson exclaims. Iceland exports much of its fish catch, especially to Europe but also to the US, Japan and elsewhere.

Iceland has many rivers running from mountain glaciers in the highlands down to the ocean and has harnessed them for hydroelectric production. In addition, it has tapped the extensive geothermal hot water in the ground and uses it to heat every house in the country as well as producing electricity. Overall, says Hannesson, Iceland uniquely meets 80 percent of its energy needs with “clean, sustainable, never-ending” energy.

Because of its energy resources, international companies have set up aluminum smelters in Iceland that use hydro- and geothermal-electric power and produce little pollution. Other companies needing high energy have established subsidiaries in Iceland, the latest being “data farms” that “need a cool place” to operate, Hannesson says.

Because of its climate, Iceland’s agricultural production is limited and expensive, although the Whole Foods Market chain buys Icelandic products including butter, meat (lamb), cheeses, water, chocolate and skyr — “a healthy type of yogurt,” Hannesson says. Iceland’s agricultural products satisfy buyers “who are looking for organic products and are willing to pay for quality,” Hannesson says. Also in the agricultural sector, the many greenhouses are heated geothermally to grow bananas, tomatoes and other products. “There are great possibilities within certain agricultural sectors,” Hanesson says. Mink farming also produces mink skins that are exported to Nordic countries, he adds.

Summers are short in Iceland but days are long — 24 hours of sunlight for several weeks — “so we have people playing golf at midnight,” Hannesson says. In addition, he points out that on a per capita basis, Iceland has the most swimming pools in the world, almost all year-round, outdoor pools heated by water from the ground. More than a half million tourists visited Iceland last year, he reports.

Iceland’s young people are another asset. Many go abroad to study, and he was one of them, earning BA and MA degrees in political science in the US, at the University of North Carolina, Chapel Hill. Each of his three children also has at least one degree from an American university. “I have a lot to be thankful for. The open doors of America’s universities are one of the great strengths of this country,” Hannesson says.

But even if Icelanders might stay abroad for a few years, most return to their homeland. “There is a strong bond when you are from an island,” Hannesson says.

At 64, with 34 years of diplomatic experience, Hannesson says his function in Washington is largely to keep his and the U.S. governments informed about what each is doing and the possibilities for further cooperation in all mutually beneficial areas, including trade, geothermal energy, and culture. The US is “our biggest and most important ally for security and defense,” he says. As the smallest member of NATO, and with no military, Iceland contributes civilian support in positions like flight controllers, police and medical personnel in Afghanistan and other places where NATO and other international organizations are involved, Hannesson says.

There have been no incidents of terrorism in Iceland but “we all have to worry about that. We are in this together and no country is an island in this sense, even an island country,” Hanneson says. Accordingly, Iceland has imposed strict security on flight arrivals from other countries — “the same security as throughout Europe and the US,” he says.

There is nothing Iceland can do about its erupting volcanoes but with its assets, including fishing grounds, energy resources, an educated population and a flexible workforce, the country is recovering from its economic breakdown and “in the not too distant future, we will be firmly back on our feet,” Hannesson says, citing forecasts of economic growth starting late this year and through next year.

He points to a bright side to the recent volcanic eruption as well. Although it initially had some effect on tourism as some people canceled their bookings, now “many more adventurous people are coming to see the greatest show on earth” and for geologists and natural scientists as well as nature lovers, Iceland is a “dreamlike laboratory,” Hannesson says. “We think that in the long run, the Eyjafjallajokull PR will only be beneficial” to Iceland, he declares.

Whether they have to deal with their economy or the forces of nature, Icelanders are prepared. “We have endured many worse things throughout our history,” says Hannesson. The most famous volcano in the country, he says, is Mt. Hekla. The fallout in 1875 from Askja, another volcano in the northeastern highlands of the country, caused many Icelanders, especially on the east coast, to move to North America.

Hannesson cites another volcano that had been dormant for thousands of years until it suddenly erupted in 1973 in the Westman islands off Iceland’s southern coast, causing the evacuation of 5,000 people to the mainland and destruction of about 30 percent of their town. “But they all came back as soon as the eruption was finished and rebuilt their town and their lives. You should just see the town now,” he says. The lava made the harbor better sheltered and the Westman islanders are using the heat from the volcano to heat their houses, he adds. “The resilience of Icelanders is not to be underestimated,” Hannesson concludes.