Although Iceland typically experiences subzero temperatures for about five months a year, the government chose a mild summer day for the crucial referendum. On Saturday, residents of the Nordic island are voting on a different kind of unsettled question: whether to restart long-frozen negotiations to join the European Union.
Iceland first applied to join the EU in 2009 following a financial crisis that devastated many families and businesses in its population of just 400,000. However, several years after that process began, the incoming centre-right government suddenly froze these EU ambitions, arguing that it could lead to a loss of control over Iceland’s territorial fishing waters and sovereignty.
More than a decade later, the current centre-left coalition government has pursued a foreign policy of closer cooperation with the EU, other Nordic countries and NATO, and campaigned on the idea of holding a referendum on restarting EU negotiations “by 2027 at the latest”.
While the referendum debate has centered almost entirely on the economy, such as the potential impact of joining the eurozone or changing fishing policy, the vote is not being held in a vacuum.
Since last year, U.S. President Donald Trump’s aggressive moves toward Greenland have brought discussions about Arctic security to the forefront in Europe and beyond. Iceland has a strong coast guard but no army or defense ministry of its own, putting it in an interesting position in a world dominated by great power coercion.
However, the country has strong existing partnerships through its membership in NATO and the European Economic Area (EEA), which provide free movement of people, goods and capital across 30 countries. It is already part of the Schengen area, which allows visa-free travel. And it just signed an agreement with four other NATO countries to strengthen maritime security in the Arctic and North Atlantic, an area considered important given the Russian navy’s movements in the region.
Analysts say security is a concern in Brussels.
“Iceland will become a much more important partner for the European Union in the security environment than it was, say, 10 years ago,” said Almut Möller, director of European and world affairs at the European Policy Center think tank in Brussels. “This is a completely different situation.”
And at a time of global instability, Mellor said there is also a desire within the 27-nation coalition to “show that the union is alive and well and that it’s working well. We welcome new members and we want to show that we’re a growing union in terms of geopolitics, geopolitics and security.” This was particularly the case after Britain’s 2016 Brexit vote, which fueled speculation that other countries wanted to leave the European project.
Icelandic Prime Minister Kristórn Hróstadóttir said in a recent podcast interview that EU interest could work in Iceland’s favor.
“Given the geopolitical situation that Iceland is in, I think now is the perfect time for Iceland to get involved,” Hróstadóttir said on the podcast The Rest is Politics. “I think it also gives us a strong position in accession negotiations.”
Ragnar Hjalmarsson, a senior advisor at the Icelandic think tank Varda, says ordinary Icelanders are not used to seeing themselves as strategically important, but that is rapidly changing. The country was neutral during World War II and had not faced a strong threat since the days of the Soviet Union. US troops once stationed there decided to withdraw in 2006 as the perceived threat level decreased. However, following Russia’s invasion of Ukraine, U.S. naval activity and NATO investment returned.
Meanwhile, “the Trump administration’s actions towards Greenland have caused a certain amount of fear. Its brazenness has caused anxiety in Iceland,” Hjalmarsson said. It didn’t help that President Trump repeatedly mistakenly referred to Greenland as Iceland when talking about his demand for control of the neighboring Arctic territory.
“But it also made Icelanders aware of Iceland’s strategic importance. But what voters are talking about hasn’t changed.”
Opinion polls are consistent
The Social Democratic Union-led government’s argument for a ‘yes’ vote boils down to ‘let’s at least see what we can get in a potential EU deal’.
The prime minister said it was “remaining voluntary” to see what the deal was. “Even if you’re someone who might join the EU, you can say yes to[negotiations]because you want to see how it turns out.”
Hróstadóttir’s main argument is that joining the eurozone will bring new investment opportunities and stability to Icelanders and businesses that currently operate using the unstable krona. He also said that maintaining national currency reserves is “very costly” and pointed to other potential benefits for the EU, including subsidies for Arctic agriculture, infrastructure financing and academic research integration.
But the Prime Minister also acknowledged that many people were rightly concerned about further power transfers to Brussels.
The “No” camp, on the other hand, is adamantly opposed to EU membership, citing sovereignty issues, particularly regarding the idea that foreign vessels could access Iceland’s fishing waters. (According to data from the Nordic Council, fishing accounts for approximately 6.5% of Iceland’s GDP).
According to Gallup polling data, the referendum could go either way, with around 51.5% of those with a position on the issue saying they want EU negotiations to restart, and 48.5% saying no. A small number of respondents said they were still undecided.
If the referendum passes, there will be a second referendum, likely more than a year later, on whether to formally seek EU membership. Iceland’s foreign minister told local media that negotiations to reach an accession agreement could take 18 months.
One reason this referendum feels different from other countries’ accession processes or the Brexit quagmire is the fact that things are already going pretty well for Iceland.
The country ranks among the top 10 in the world in GDP per capita ($98,300, one spot above the United States) and has relatively low unemployment. Residents also receive universal healthcare, universal health insurance and equal paid family leave as part of the country’s Nordic welfare model.
However, it is not without its problems. The scars of the 2008 financial crisis are still fresh in Iceland’s memory, and the country’s small currency makes it prone to volatility and inflationary spirals. The cost of living is also incredibly high.
Some in the pro-EU camp argue that the use of the krona will make it more difficult to attract international investment and prevent monopolistic behavior.
“People expect EU membership to bring greater economic discipline and stability, as well as increased domestic competition,” Hjalmarsson said, summarizing the arguments in favor of restarting EU negotiations. “Oil import and distribution is controlled by three to four companies. The same is true for all major sectors.”
The “no” side has its own economic concerns.
Hjalmarsson said the Eurosceptic view is that “our own control over our own resources, not foreign domination, has ensured Iceland’s prosperity. Therefore, to jeopardize our own control over our own resources is to jeopardize our future prosperity.” Since 2009, some trade unions and business leaders have moved to the anti-EU camp.
And the idea of a formal seat at the EU table remains unconvincing to Eurosceptic factions led by the opposition Independence Party. “What good is a seat at the table if we don’t make the final decision?” Independence Party leader Gudrun Hafsteinsdottir said in a statement.
However, analysts also point out that Iceland is an attractive candidate for the EU and could secure some exceptions from the EU’s fisheries and agricultural policies, given its wealth, as it is a net contributor to the EU budget and has fewer needs for reform than the Balkan countries that wish to join.
“I believe that they will be willing to respond to Iceland’s special circumstances, and that includes natural resources,” said Mellor of the European Policy Center.
Even if Iceland votes in favor, there is still a chance that months of negotiations to reach a formal agreement could break down. The big unknown is how much the EU is prepared to offer Iceland, which has a very tight population, to secure membership.
