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    18 views15 pages

    Can Small States Choose Their Own Size The Case of A Nordic State-Iceland

    Uploaded by

    Danny Cudjoe

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    © All Rights Reserved
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    I EEE _ OO Qe, oe Intemational oii Eomomy Sees Genes Ete Tiny N.S, Pre sd Duce nite of onal eltons, Unters te Ns Ins, Tee Ts ites clude: Imroinowcisoraau nie Anthony Lens Pigeon Gant Sancta? Nowa mittens es Sees Stang Over BEN 97-0385 70909 pe Ingram ang a SSRLSASLENENS, stone meen st The Diplomacies of Small States Between Vulnerability and Resilience ited By Andrew F, Cooper ‘sca Dino aut itt Fal, Come fr Inman Gonna ‘Timothy M. Shaw ‘fer an Dict naa esti! ato, Ths of eat Se ging Paden eso oe ‘eget eta Aen can nd tna per conan ‘ptlexton maybe natin witon parison Seenisamm pier seaccicemiiepsiercse | Spon Sen andrcs at ages be recto cence pam ited oping sob he Congr Can | | py Sten a OC Ss ane seyret Sony sor et rir 2 pn Toe ators ee ead tha at beet Sea Rite tence an Sion gant nn UK an agit of Mac aes (ined ares mtn ogy ir Go ewan gsc ane REST pwevarin te dhaenl Mas Pec Pete cnn fb cect othe eve Sls encod ren ek ee tein gd neat ees ‘ype ess aah pe ‘Sitonnont posers ety eign Aig cer bs al othe teh Uy. ey cares casing Pain Ota ‘adores na an betel ye ere "edad yvonne yan Ther emma ita eo Binsee doses een siemens matter Sjouincoy Ela Pres ndbindn Get any Fitts Roe Sip nd Ethoune Seer eeeee eee see seeee eee ceee eee eeeeeeeeeeceeeeee cess eee ceae eee a | | 7 | Can Small States Choose Their Own Size? The Case of a Nordic State ~ Iceland { alr Trrhalison Introduction ‘The sim of ths case study sto explain why Island has changed ts {ntemational approach and become amore active plein the interna, ‘onal arena since the mid- and late 1990, leland’s increased actly in the intestional system is explained by fie intereated feeanes: 4 redefinition of interests greater econanl source administer tive resources change ot perception and peference bya lege pat of ‘the lean politcal ite; and an extemal prsare eflecting the ew of inemational actors. all thee festiges have led to a poley change : 1 the domestic lve. There hs Been a move away Hom ay interne tonal approach built on historical bateralitons, with namo {oes on the concrete economic advantages o be ain fom all re. | seas acuity, to an approach based on mote broadly defined interests ‘nd increased intemationalactaty within malate organisations Accordingly, leand is moving ost of Keobaessystenr-nelectal ‘ategory, that i, elng a sate which simply adjusts to the intera Sonal system and cannot changeit. Recent, land canbe tga belonging to Keohane sjtemaecting estegory hat being» tate ‘at cannot infvence the international steam ots own bat a do 39 together with other stats (Keohane, 196: 293-6). The decision by the Icelandic govemment in 2998 to apply fora seat A in the Security Counell of the United Nations (UN) demonstates the shi from a reactive Intemational approch to greater activity the international arena. Iceland joined mos the iterations! organise ons crated after the Second Wool Wr, but une other Nove ste, iti not sek an active vole thin the. The lelance govemments rere 120, The Diploma of Sal aes attached importance to bilateral relations with nelghbouring sates in terms of trade and defence the Norclc stats, the United States and tala (Thomallsson, 2005). Emphasis was paced on obtaining con- cate economie advantages from all overseas acy, whether these ‘concerned the extension of Ieland’s fishing tone, trade agreements oF protection by the US military. The work of the UN (nth the exception Df the esblshment and application ofthe Law ofthe Sea, the North AdanicTeaty Organization (NATO) and the Councl of Europe, were ‘ot placed high onthe agenda. Governments prioritised bene tnde eas with Baropean sates ne joined the European Fee Trade Associ ation (EFTA) 21970 andthe European Economie Area (EEA) in 1994, | Hltwever as soon as market acces for Iesianic fish and maine pod ‘ucts was achieved, ite importance was attached tothe work of those Instintions excep when ves concemed Ieandle coe intrested hie umavoldsbleoutne day-to-day busines within them, Poitcans id rot engage in building a decive cl sec, including a foreign sx i ‘ice, Inorderforeelandto bezome acevely engaged in these instons (Gee detteddiscasions in Thorallson, 2002 and 2005). Motes, i Teslandiepoley maka, have been euctant to apply for membership i thi the European Union (0) since might eoparse the eaience ofthe economy (Oddsson, 2008, Ths prevented Icelind fom belong Ingto Keohane’ system affecting category of ates whlch can nluence ‘he neeational system with oer states, stat above This isin con teasttotheather Nordic ates, primary Sweden, Norway ane Denna hic can be said to have belonged to tis category in the postwar Dsiod because of thelr intemstionalscivity. Keohane dstngulstied ‘between argeand smal powers by examining Whether headers hare 2 deive impact on the itematonal community Hi this category is‘sstemdetermining or sfteminuencng, consisting of sats that an ifluence the international stern through snarl ormullstrl ction (Keohane, 1969: 295-0). Hoyworr since the ate 1990s, the leslandicgowerament has become tncresingly engaged inthe intematonal community, emphasing 4 ‘waditonal smal state muliateral approach Ielané has become more i sective within intematioal organisations such as NATO, the European Council, the Organisation for Secunty and Co-operation in Europe (OSCE), the World Trade Organsttion (WTO), the World Rank and lganisatons af the UN, such a6 the Food snd Agila Orga Z2iton FAO), the UN Edverton, Scenic and Cultural Orginistion| (UNESCO), anda number of UN commissions. sland has alr taken on leadership dates inthe Acie Cosel and the Coutel of the Hall ea States Aid for development has increased satay alongwith work ‘thin intenasonal organisations dealing with sid and development In 2000 feeand created an lendic Criss Response Unit ICRU) exp ty earmarked for pose we by NATO, the BU, the UN an the OSCE. “The ICRU isa nonsmlitary peacekeeping force’ ofinaltduale (pale, doctors, muses lavyes sr ffi contolrs,adainsrtors, ec) aval able or api deployment abroad, ln 2001 snd 2002 i contbuted Yo 4 ‘mission in the Hllans in which all our intemational bodies named shove were invoteed. Is maln misions have been the management ‘heintermationlazpors in Frisina in Kosovo an Kabul Aight Furthermore, since the mia-1990, the Foreign Serece has extended ie activity toa number of counties and opened embesesia Ching, tnd, Japan, Canada, South Ale, Anand ang Austr, ‘Moreove, clans central administrative expabliues have increased ‘oasiderbly in Whe ast two dead, In tess of numberof personnel, the Ielandle Foreign Service has nearly doubled in sie over the last cade ts ability to produce detaled reports on fein’ status and policy chee in Burope and esewhere har changed fundamentally (ce ‘dete discussions in Thothalsion, 2006. The administration not ‘much more capable of aking an acive part inthe international ren, "et recently Ieelan’s burgeoning intemational presence is sted its share of setbacks. Ia 2008, the vulnerablty of lelan, a small ‘economy snd small ntematioal acto, became evden nthe fn ‘a criss aswel ass campaign to becomes member ofthe UN Secusity ‘Council. The smal sant currency (ne ka) el aid while the ‘thre main leanaic bank collapsed forcing the Islandle goverment to take over their operations Meveover the country came to an 2+ nomic standsll 25 foreign wade crumbled due to the breldown of the foreign curency mark inthe country. The eeandic goverment, “espite considerable efor alld wo et immedi loans an oes eco ‘nomicasstanc from Doth ts neighbours ad intemationalnsiations, ntenationally, Iceland had tailed to gurantee the county «pea ‘ent shelter watin the FU framework, including the Earopean Cente ‘Bank, even though ittockan acu roe inthe Four Freedoms though ‘membashipin the EEA Ielan gotinto major dipute with Botan an the Netherlands because of ther demands that lesiand should honour ie legal obligations within dhe EEA to depostons in overseas brmnchesof the leeandic banks. The Bish government wed ts antitetoit att ae ‘over the assets and operations ofthe two lela bk in Bian cau sng one ofthe bans to fall instantly, and substantially worsening the ‘conomlc es in Iceland. rita also managed to dey much needed 122 Te Doma of Sma Ser economleassistance promised by shetnternasional Monesty Fund IME) ‘ana he aspute had ben ete, ‘Moreover, Iceland fled o get elected to the UN Seeuty Coxnel! in mid October 2008. This was because ofa limited record of stv tes within the UN, a smal frelgn service compares wo the competitive states, Auses and Turkey, and a campaign by Ban againt lela inthe week before the woe in the UN General Assay. Accordingly, the ease of Lesand in 2006 once agai ndeats how the fate of stall ‘conomy is ted to extemal conttos and the ations of asger neigh Tous despite rapid economic growth and a considerable increase in snerntional ste Explanations ‘what has led t this policy shiftin Leland, Why has odin moved ay From is reactive intemational approsch with is focus on biateralia and adopted an active international approach based on mulisterali? ‘Asintroduced above, clan ineesed atv inthe ternational sy tem s explained by five intetelated feature: a edeiition of interest ester economic sources pester administrativeresourees change ot perception and preference by alge pt ofthe lela pola eit nd extenal pressures reflecting the view ofintemationsl aor A redefinition of interests ‘The Jelndic politcal ete was highly ambitious concerning domestic fin throughout the brenteth century. Ielanle society wa a Tormed fem being a way poor undeveloped agrarian society t0 3 rch indastal and commensal socety. The prtitlon ofthe ete wat clear. seldetermination over the country’s landmass and suround {ng waters, Accordingly, the elite managed to gaia independence fora Denmark (domestic rule in 190, sovereignty under the Danish Crown, {9 1918 ada epubie in 1944) and fal contol over the 20-mleihng zone rroundingthe slandin 1976 atte steady succes extensions of {he zone). This was combined with in sim foramote succesful ecancay and higher living standard ~ though Ieland’s proses in this respect ‘were perhaps nat alvays comely focused “Throughout the twentieth century fh and marine products wese far tne most important expr’ of goods aconnting or 98 percent in 1940 (National Economic Inset, 2001), According Leland’ wade policy| Inada lar objecuve to guaante i sh and matin product access 0 sso worranatysing-— nike Teli 123 Important markets manly in Bsn the EU and US. On the othe hand, fish and marine products have declined siguicany in importance in ‘the ast four decades In 2006 fh and other marine products sented {or jst over 0 per ent of merchandise export and roughly oe third of tora exports down fom 82 percent and 60 pr cent repeciely $1991 (Cente Bank of Keeland, 2007), The economy has diversified Drnging into the plete exports of aluminium and medal and pha saceutal products, ours industy and recently finan sector, ‘The export of manufactured good has grove rapiy ad accounted fo 3 par cent of merchanize exports in 2008 wile service accounted for almost 35 percent of total export reves (Cental Hank of lean 2007). The government has had to respond to and focus on a much ‘vider range of intrest international. Fonstance thas extended ‘wook within the WTO and expanded ft Foreign Service to ditt na. fs, The inerational weak ofthe goverment nov bears the hallmark of protecting the new financial sector ands operational consequences road, as well as expor-ouentd companies such a pharmaceal ‘These hasbeen ash of porte from amaze osu on dsc bene fits from overseas elatins to mote boul. defined interests in tems of ‘theimportance of contbutingt the work ofthe intemational comin nity For instance, land's increased ati within te WTO e seem at ontubuting to beter market acest for lelanle products around the slobe. As, the opening of the embassies in China, Japan and India 3 Response tothe growing and potential mportance ofthese mat for Teelndic companies (Asgumson, 2008), The pv role of thee ates Internationals also recognised by decison to open exis thee capitals, Moreover, Icelandic goveraments did nt ake an active ptt In the work ofthe Wold Bank in the twentieth century, but atiched Importance to membership inthe IMF due othe several economic be efits Iceland rected tox IMF membership! and not fom the World ‘Bank (ntemational Monetary und, 205; lasttate of Foonomtc Sti es, 2008) In 1997 a report stacy the Ielance Minty oc Foreign Ais sated that fein had done ite to increae is expe and 1s level of development astance. The consequences have been that [eeland has ad eifity in taking om cues within the group ofthe Nordic and Bat states in the World Bank Group ata 197). n'a report that followed in 2008 the government was encouraged to take 8 more ative part inthe goveening andthe work of the Group (nga and Hara, 2003) tn the lst decade, Iceland has incresie ts devel ‘opment ald substan and there were plans for considerable annual creases in overseas asistancebefote the nancial eis. According, 126 The Dip Sal Ss eeland ns increases ntemational activity in order to facta ain Jnterational organisations, such asthe World Bank opened an embasy tn Aca, and wos more cosly with developing sates within the [UN Inceased international acts seen as belng ofbenefit to Iceland 4 the long run. Tor istance,leeand’s inereved id expencitre and {nterntioal cooperation with small developing sates was obiiously| linked tos bid fr an elected, rotational seat on the Security Coun cc Membership within the Seurey Counel as ean to benefit ean In that cooperation with distant counties could help oll celtons| ‘conceming Ionic adeneretn other interational organist, Tuthamoce, the Icelandic goverament was force to re-examine is defence poi ater tye US goverment decided oles down tsmlltary basen the country in 2006, leaving Iceland without amtary presence, Howes, the defence teat signed between the two state 1951 ~ Targa tesed ona defer a tad agreement fom 1511s place. But since the withdrawa of the US malty, Leland bas sought {ermal defence coopaation with European state, such ab Norway nd DDenmtk, a well a other NATO members Dsedon the Ate Tray In the proces that led tothe military itadraval Iceland secognised 5 obligations contbute to sown defence after consderble pes sure forthe US~ previous paid for and operated entely by th US fm the ate 1990s, lela became more active within NATO ad started 0 ‘contiute tote operations. Ths waa pact of the goverment policy ‘o share some of the NATO burden in the hope of Biping to ln tain the US mutary presence inthe country (Bales and Thesllson, 2008) Since this strategy’ file, lode’ defence policy no longer focused encrelyon coopzaton Wit the US. leland now works more Closely with Eutopean ts, emphasises work win NATO, and hae since adits fis defencebadgetn 2008, Hence, leland'sceonomicand poltical intrsts ae becoming mich wider inl respects ‘Greater economle resources Jealand vas one of the poorest states i Europe athe begining of the ‘brent cenary and resived development ad unt 1976 Glad 2008); yee ts economic developmen: over the centsry was remarkable and hasbeen so pactiulany since the mld-1990s. The zslence of the Tealandic econo coinids with neoiberal polices nd membeshiin the FEA since the eaty 1990» The eelandc economy was tansforned ‘trough various measures such a5 tax reductions, the prtatisaton of staterun businesses ~ pariculy banks ~ and improvements tn the ‘compote environment, Acces to common markets ied by the com- puliryinplemeneation of EU regulation n compton and finance ‘hough EEA membership, lad to greater prosperity, Accordingly, Jee Jandicgoveraments managed to enlance the fesbltyof the economy, ‘ou ape marie ibn the pally eamenork othe comty ‘The ibeaisation and privatisation processed toward api growth of the inancal sector This gromth as orginally I by favourable eh Prices a global econamic recovery, ase in expors, and orga iver ‘eatin the aluminium sector I wt sustained by private consumption and investment in the non-taded goods sector manly anced by fr ‘gn cdit Histol, lodand’ property ws Irgely ult om St ‘comparative avantagesin abundant maine and energy resources. How {ve gvitn in the twentfit century has been boosted by services Joested mainly inthe Hani services Sete. ram 1915 to 2006, the svaage annul giowth rate of GD? wat about 4 percent and fom the ‘mid-1990s Iceland has experienced one ofthe highest grovth ates of (GDP amng the Organisation for Economic Co-operation and Deve ‘opment (OECD) counties. Despite the smal sizeof the econozy, the Salles within the OECD, sefleting the 310 000 inhabitants of the county, Telna’s Gross National Income (GND pe capita waste ith highest among OECD counties and the eighth highest in the word, mounting to US836 000 in 2006 (Cena Bank af eeland, 2007) | ‘addition, leland was anked fst out of 177 counties onthe 2007/2008 Human Development Index publisied by he UN (UN Development Programe, 2007/2008)? “The economic oom beginning i the mie-19%0s, and the incseated revenue that his fllowed, has allowed government 9 move fom 3 selavly lage public sector defict in the 1980s and extly 19908 10 & seces of budget surpluses, The fil balance has een well above the (O8CD average (Cetra Bank of Iceland, 2007). Tas hus enabled the government to allocate more resoures tothe ental administration. Forinsance a decsive Foreign Sereice has been bland al nites and their instutions have afforded to spend more time and resources ‘om external elation. Besides, te goverment hasbeen more affuent ‘and polticians more ling than Before to eontibate ointerational aidand wake prt in interssons burden sharing, Aecordngy thee has een Tess necessity fo focus entirely on getting direct economic benefits ‘tom overseas activities That std the vulnerbity of a sal economy has become evident sm the cae of leeland during the credit eis n 2008, The apd foreign MY export 126 Tepes of Sm Ses expansion of lesan banks and companies, mainly based on fosign botowing, led to major constants on the economy an the Kaa. “The Ceotel Hank offend has had ificulesin defending the kn duet ts lack of quit In mid. 2008 the BMF conchded tat the Ice landic economy was a dificult nd uncertain taming pon" long ‘Rome grown orelgn funded boon was coming fo the end Is legacies are overstetched private sector balance sheets, lage mactoeconoe Ambolance, and high dependence on forelgninancng’ (IMF, 2008). The Icelandic banks were hardy the ceteris, athe costo bomen rose. The hanks responded by slowing knding growth and rationalising Pulance sheets "Tae Kr, fel apd inthe st lf of 2008, aking ie somewhat move comfonble for the exportorlented indus, At the sme tie, art ue fori orzoseng andthe higher ost of ported material sponse tothe fall ofthe ka, The ‘Cental Bak of leeand concuded blatal swap faci arrangements ‘with the Cental Bans of Sweden, Noreay’ and Denmizk to bolster Intemational guid, The facies are a precautionary measure made te provide the Cental Bank of loland with access to euros if nested Tach agreement provides up to EUR S00 milion, where the Central Bankafleland can acquire euzos against the Telarc kaa, The sap agreements ae faites tht may be dram upon bythe Cena Bank (of leland wen and if necesary (Cental Bank of land, 2008), How ‘ter, the Ieeandie Central Bank fle to bolster it extenal Indy oy further Requests om the Central sak and the leelandc govern ‘ment to the neighbouring central banks and governments in the Nordic Sates, the UK and the US, to come to leeand’s recie were declined ‘These sates doubted the goverment’ ably to stand by is overgrown ‘nancial econ ‘cconsingly, the swap fay arrangement aid nat prevent a fares fallofthe kina, reduced tan al-ime ow against the ato a ewe weeks sites the agreements were made public (OaKey, 2008). In atu 2008| ‘he three man Ielandic banks Were ationaied by the goverment 2 they faced Danirupy caused by Tending sop’ abroad. Te foreign ‘mency matket collapecd lading the county to an economic stand. SU. The Ielanie government sought emergency loans and aistance ftom the IMF aswell as from the EU emergency fun and sever sates ‘found the globe, sacding Rusia snd China. The (MF came tothe esque and prorded the Ielandlc government witha $2. bilo loan. ‘The IMF econonie assistance package incded a promise by sev states to Joan Keland about $3 bln inorder However, Brain and aie Talis 127 the Netherlands tured against Iceland in onde to gurantethe savings oftheir czensin overseas branches ofthe leelandi banks, They args? thatthe lelndicgovemment was oblasted to guarantee al depots of ‘upto about FUR 20000, Iceland cumed that these obligations were om ‘ledby thelelandieDeposton’ and invertor? Gusantee und up by ‘he BEA rulesandif the fund sunable to uly meet ts obligations ar wat ‘he ese, the leeandicgovemment dg not hare to step in, The Bats goverament used its ants-terztt lato tale over the assets and oper Alons ofthe two Icelandic banks in Brita, puting the banks and the Teenie Ministry ofFnanceand the Cental Bankon the Brith govern rent list of terrorist organisations (it that inches al Qsed). aia andthe Netherlands used tht influence to delay the much needed emer {gency loan fom the IMF loan from the EU emergency fund and Tos __ from the leeland's loses ales, he Nore tates Infact, they managed te block all temps by the Ietandic government to foregn cutency loans swell as othe forms of economic assistance land fly gave sto tis pressure in onder to prevent total economic cola ~ nce the stock of oreign cutency in te Iceland Central Bank ws rapidly coming to nothing ~ withthe Bank providing foreign cureney to on!7 Tecan companies importing food, edition and ful ‘The leclandlc goverment was left withou frend a the Ielande me minister pot and failed to secure new fends despite sev fal atempts at getting loans from Russa nd China, lends lovest neighbour, the Note stats, were al on the side of Britain and the ‘Netherlands fering that if Iodand would not be oblige ta stand by guazanecng all epost up to about EUR 20000, he ced ofthe inl financal Sector within the FEA might be n danger Ieland wat ‘aced with iateral negotiations wit the Seal andthe Netherlands without acces tothe decison aking proceses within the BU inst. tons. MeN aid not provie lei wit an immediate eter fang to stand by its agreement ith the leelandie goverment and sac Ing to pressure fom Bain nt to formally approve the agieement and putitino action unt the dispute between Brain and Iceland ad been etl ‘The Central Bank ofeland wa spy too small to defend the exten sive foreign expansion of lslandic banks and companies Moreover ‘he kana cd not stand a chance ia the crit crisis de fo the Ite Teetandic nancial sector operating sbrond. Cnsequent the ity ofthe kréna has gone. Oving to the Mctuation ofthe kxéna and ie collapse, the lela business community ir united in urging the gor ment to explore the possblty of adopting the ero, Furthermore, 128 The Diploma of Sal tes 2 broad consensus has developed among economic seco in lean vith the exception ofthe agrarian and fsheies sectors ~and felands ‘most influential bour union for negotiation vith the EU on acts Son: one of the main reasons gen for membership ithe imporance of rectving bakup fiom the Buopean Cental Bank Furtheruore, ia June uly 2008 an opinion pol indeated that about 60 percent of voter ‘wanted the government to start negtations with the EU on accession {nd the adoption ofthe eo: ofthe semaine of exponent, equal ‘numbers were opposed to such moves or undelded(Capacent Gallup 2008). ‘he grand colton goverment, consisting ofthe centrghtInde- pendence Paty CP) and the Socal Democrat Aliance GDA), his been ‘ivded on the EU and the euro questions. However, the lading DP _tehich nas aitonsly feel opposed EU membership nthe adop. tion of the ewo, & now reriewing Is European policy. The party has ven in to severe pressure from the busines comity and decide, {nthe midst ofthe caren economic eutbulenee, ¢o examine i detail ‘the pot andcons OFFU membership. After oe of his minister clled for ‘doption af the euro within the framework ofthe EE (Bjreacon, 2008), ‘he leader ofthe IP and prime minister, Gtr. Haarde announced tat {the governments commits on Europe would 19k nto thls possi ell ying the lxéna tothe eur. However, Haazde has expressed Goubrs about these posses without fll EU membership (lelanaic Public Radio, 2008), an option he has presousy opposed. The leader ofthe SDA andthe foreign minister, Ingibjorg Soirin isa agrees ‘nth Haazde that adopting the euro without joining the EU san uniely possibly Hence, the vulnerability ofthe small Icelandic economy has become cident in the financial exis, Iceland benefits enormously fom EEA ‘membership (Le. access to the common matket),partipstion in the Four Freedoms ofthe FU, wth the exceptions ofthe Common Agra lan Policy and the Common Fisheries Poly, and creiblty due tothe fact tit Ieland as to implement exaciy the same fnancal lei on and regulatory ramevork as EU member states However, leand Tacs the shelter of the Baropean Cental Bank and faces 3 sive eo: nomic dovaturn ‘dominated by extemal considerations’ (IMF, 2008) ‘The IMF predictions inthe summer of 2008 had al become event by ‘he autumn: the kxéna could depreciate mote ifthe outow of capital ‘ontines extemal gt sk remains «ke concer, case By the fenegn debt of tae pate sector ~ cheiy banks ~ and Gomestc ks sachs infltion, House and equity pices, and household and eoporte ‘Indebtedness (RF, 2008) The economic mia’ of the lst decade s ‘over. The woatity of» small economy is once again evdent Teelande governments ave ructanly sought shelter within the framework of European integiation inorder both to gurantte acess to the European matet and respond to economle dotntums, Ths ws the case with EFTA membership i 1970 and SEA membership im the ‘ently 1990s. Yet again, the government led bythe IP considering the EV terativeand adopting theeur. A question marcas been sddedto| eel’ capacity to murtre the resent nature oft economy without the protection of EU membersp (eater administrative esorces “The increased capacity ofthe Iceland ental adainitration over the sto decades has gone hand nan with pester economic ess, {wider ange of interests, and the growing importance of ntemations ‘organisations and change inthe pits of poticians, The sy of the cet service to engage in information gathering and policy-making hs increased enormously. It rable to fourm its own polices, tat, tt {sles dependent on interes rope and polcyaliag in other Nordic states and has the ality to Sally puso policy objectives, Over {the last decade, the Ielanic Foreign Service has neatly doubled ia sce In terms of number of personnel (ce gue 71), and it experice on 2 wide sage of intematonal affairs has also increased Thorhallson, 2002; Thomasson, 2003) Iealand’s membership within the EEA required all mines and many of ther isttutlons to hire expers inthe eld of Furopem integration ter to engage eetvty in EEA policymaking and to inplemeat FEA regulations. Moreover the adminisuation's engagement in European Integation has given oils greater room for manoeure ia thi day today work since politi ate lage absent from the formal EEA easion-making system (Lergreid ets, 2003), This may have given fils greater confidence concern policy-making and representing Jeeland abd since, historical, feiandicpoltcane hive nteered to a greater exent in dhe work ofthe buzeaucacy than nthe other Nol stats Kaistinsioa, 1983). Membentp within the EEA also forced minstesto increase expertise within tel: ministybyprofesionaly i Ing specialists instead of sing appointments to return politcal favours. ‘wider range of economic and pelital interes, a more complex Incemational stem, and a gate importance of latemationa ns fusions, such asthe WTO, the BEA and the Acie Counc havereqied WF 0 medina nat as ate Tham 122 eeesdgeeaee i Sac RREETR EES ‘gw 74, Th nambe of pope mga he ld Fags Severn ioe Bro tf ity or eli Govern tea, profound knowledge within the aministzation. Acondingy the admin ‘Straon has Deen engaged in a steady and succesful apacty Dll ‘The consequences ate cen; Iceland hasbeen able #9 take on con siderable leadership duties abroad. Tor instance, Iceland assumed the {hamanship ofthe Coun ef Burope for the fist time in 1999 eater Inaving aways argued tat it dd not have the adminisuative capac to ‘tackle the chairmanship dutes that rotate among member ste old abo caved the Acie Coun rom 2002 to 2008 snd eld he pre ‘dency of the Counc of te Baltic ea States om mid 2005 to i206, Whasalso taken an leadership sles within the WTO, the Word Bankand ‘the AO, UNESCO and other organisations and commissions of the UN Moreover, te extensive operations ofthe ICRU tthe intematinal se ports in Pristina and Kabul mentioned above, have been acknowledged. | Turthnmore, since he mid-1990s, the Foreign Service has extended i its actin to’ mber of counties, gue 7.2 shows the rapid rise In the numberof lesandic separate embasies/missions aboad in the at decade. sand opened 3 number ot embasiesssons inthe 1940s but inthe 40-year period tat followed, only four ew separate | mbasiesiisions were established abroad (nist or Foreign At, Government of eland, 200). Keand dd not rest tas mporant 0 ‘Salish embassies to serve indian staes abroad (Asguison, 2008), TUVVOTTTOVUTOCEVIIOU ES es Sere Te eee (Pest omtentan pernen sgromint ecm | _Achange of perception and preference by the politcal elite ‘Te opinions of relevant domartcactors, pac poltial eae, regarding the states ality to engage in intemational sas eno be ‘ignored. The willingness of Iaders to paripate in the inematenal community is ao of key importance a understanding a sates exter | policies. Poiicl leaders’ preferences and perceptions oftheir state fd the intematlonal envionment a base upon wiih they bull ‘hei tate’ international engagement. Preferences’ Includes thre | | featues of the domes politcal elie: ambitions, poaisation and eas regarding the international stem, ‘Pereptal Sz’ Is the sizeof | a state a ewes by domestic actors in comparison wih other states (Thoallsin, 2006). This ree how pobiteal discourse may deter rine how actors view tte’ sis and capabilites (Se for instance Hansen, 2002; Halfdaarson, 2008, There are three sues here: is he ‘changed view ofthe leandic pital ete regarding lend’ Se and ‘extemal cpa sendy, the ‘ne’ eliet or eoogy of decison ‘makers that iceland has olgationsin he ntemationa tena andshoulé Contribute tothe wellbeing of indivi and international organs ‘tons and nally the belle haa smal state like leland can hae as intemationaly 132 Te Diploma of a Sats Inthe at centay domestic actors in Island seguded the state av Ing considerable internal capacity in terms of he sblty to ld wp the inasracure and provide a decent living standard. Howeve, unt the Tet at-1990s the Jeland politcal elite didnot regard lela 3¢ having te external epacty needed to engage in widevangig inten ‘onal acti. eeland pollens lacked the ambition to pay an ative part in the intemtional arena and seemed not to have believed at Teelnd could havea say within itemaiona insttions (ae detailed scsi in Thorhallson, 2008) ‘The politcal discourse in Iceland was based on sef-determination segatding the extension ofthe fishing one, iminisng or increaeed pendency om th US military presence in the country and the lack of pola wil to transfer power ftom Reykjavik tote nsutons ofthe (Thotallsson, 2008. also. itcentsed an the necrsiy-of dering ‘concrete benefits fom overseas activity Glade, 2006) Polley makers ‘opted for aesctive Intentional approach based on lateral contact ‘with neighbouring tates, Why soul sate uy to inuence decisions {taken in intenatona eganisations if ts pois makers steadily regard ‘This view ofthe Ieandc pital ete was in sharp contrast to the ews of the elite in other Node ates, who regarded themselves and ‘het states as being uly capable of parulpting actively in he iter ‘atonal community. Moreover, the postwar political dlscoure in ts [Nordic states was chaactened by the obligation to pertipate in the Intemational system (Arches, 2003) For instance, othes Nerd sates provided 25 per cent ofall itary personne! deployedin UN peacehep Ingoperations during the Cold War (Embeyof Norway in Copenhageh, 2005; Ministry of Foreign Aas, Government of Denmark, 2005) (On the oer hand, as has been sated above, there has been 8 cont plete mmroundin ean’ interstonal approch in st en yes, Tealand has become mare atv nal of the international insite, rientioned above. This policy change would not have occured were i not forthe changed views ofa large portion ofthe ela pital ete ‘onceming lela posites, role and duties, internationals The ee Indic government aso regards Iceland a having a duty to contbate to the Intemational community 8. Gislastts, 20077 LH. Gilad. tu, 2007; Haade, 20063 drgubladi, 2003). This has led to Iceland ontibtion to a numberof international inst and comission. Tesland has nt only become highy ambition is intemational act ity by taking a more active part In the work of thse organisations, Dut Is pooatsation has adeally changed in the la ten yeas Thi aie Tis 138 ts mane nthe Poly Statement ofthe pent goverment which States “Human sigh aces deveopment eeopetion and 2 focus on peace esolten of esputes wl be the ne eoenestone co ean foreign poly. sand shold sm for laden inthe ‘anpaig aginst maine potion sndin gba wocto counter cite ‘hange’ Pole Statrent, 200, ‘conser nmi of potas now ee to cone it pose forthe county to innnce dations taken win iterstona ist fetons. Moreover sands sen aang ale ly ade sty {Scontabute to the nenatonalcmsiy Gare 200), Aso the Telndeptca ete, atest the proent oveming ote has changed {ove raring thenteratona tem ls pcepsonearding ‘heintematonl sytem hasesangeéince lane despite saline IsSean as having as thin “The iesve cet In 2004 and 205, aout whether or not = land sould continue with its aplation to become b member of the UN Secuty Counc showed to opposing camps dsagecng on Ieendsimeraonlaprach. On the oe hand there atthe ah {onal cmp srging fran interational approach bse on economic pine, wit ile oF ao bale that lsland could exe nen in Ineratonalissions and in he inemstonal sytem generale uso 2002; Mab 2005 gurl, 20051). Tis {ounded onthe notion of lina sales compare ote sate, ‘elnited adminis capac and the convicuo that merbeship ‘hin the Sey Counc wold not ring Kean any Get bene ‘is Gee Mound, 20080, The nancial rden that would result {rom need ntensionalcopetion sho playa pat inthe debt. Jn 2004 and 2005 the clan forelgn mins, Gon, mee pe minister for ore han 13 yeas 1991-200) sd atc the ght of env Independence Pay, ase doubts about the conti fin of the crpaig fora seat in he Seay Counel becuse ofthe Cstimated hgh or invaie. He mas spp by a somber of MPs in is pay QlogunBld, 2008, Mongnfiad, 20084, Mesa, 200Se) On seven occasons dung his prenlership Osan guestoned ‘weer sate elaad could ave sy sty nan nena “organisation like the European Union. : ‘athe other hand therewas te camp comtntes ocean astringcapsbe of hing an aie prin he internat omy nd navng dts twats the ouside word fart, 2006 Harte 2007-Theforgn miner, Ge Hee, sk fom the ndpencence Fy and who tok ve fo Odo nS 205, ated the 134 Te Dipomace of Sa Sater governments policy to campaign fora seat inthe Secusty Counc for 2009-2010, He argued thatthe reson forthe cpg wa to plac lee Tand in a postion to beable wo inluence decisions which concer the ‘ntmationl community He ated tht the adainsatcn snot too small to take on the duties assonated with membership on the Coun Al and would manage this by relocating perionel within the Foreign Ministry and having staf from other ministries work temporal ia the Foreign Minis. He daimed that Iceland's main goals inthe Counell ‘would be to promote the core values of te county’ foeign pole, hatis, human ght, redo, respect fr peace and seca (Hande, 20060), Moreowes Isand'smain alm would be dstemament and ope vent the further spread of nsclear weapons (Haare, 2006) This ater view prevails now under anthes orig anistes rom May 2007, ede ofthe Social Democrats gir Snin Gildea Shes enthusiastic — abou eta ner an more ave Inteional roe ad eg Tee Ind as having duties towards the outside world. Under her leadership lecand intensified ts campaign to get satin the Secty Coun emphasising olan’ abity to conte to aman ight, pticlr'y ‘women’s rights, and asst developing stats, partly small devel ‘oping stats (Gilde, 2008). Gnade hat had he ful biking of asede (now prime mins). “The prime Feason for Iceland's historical absence froma the Security [Counc isthe lack of endnusias on the part of previous governments sn land e> play an active prin the interatonal comunity. They id noe see any reason foreland to oun the Coun since ths would rot provide ay det economic benefits for Ilan. In 1998 Ioan ‘ws the only Nore state not to have applied for set on the Counc ‘Moreover, Kelana has not taken on the presidency of the UN General Assembly a post which all the other Note tates have hel, aswel | ‘Vorembourg (1975) and other counties of smi’ sch 8 the For. ser Yugoslav Republic of Macedonia (2007, Sant La (2003), Mata (0900), Lebaron (i988) and leland (1960-61), al of which wee les economically advanced than Ieland (UN GenezalAsembiy, 2008). In sutunn 2008 feland os its bid for a seat on the Scurty Counc ater | hurling defeat by Austen and Tukey” lesa received only 87 of 182 votes for one of two rotating European seats onthe Seculty Cou Ci. Aust got 138 votes and Turkey 182 votes, achieving the two hid ‘margin neeed for eleeuon in the secret blletng, The rel can pasty beexplaind by the lnk of intrest the eelanle goverment has shown regarding UN work ver the yeas. Also, the Ieelande Foreign Sree found ef maygaased in the secon campaign against the much larger and more widespread Foreign Serco Aus ad Tush. Rar ‘thermore, Rtn’ campaign agains Iceland's membership in the nt fe days before the vote, ue to the nancial lspute, lost leland many ‘votsin the Commonvealth and the small Caribbean sland sates The "esion defeats seriosblow to those within the Icelandic govemment ‘wo have campaign fora more assertive and activ intemationl role Forthe county: The defest to ndists the fractal positon of eland a smal sates the intemational community despite ts efor to increase -Extemal pressure ‘he peception of inernasinal acon, sch as presse groups, fms, states andntemational Insttons regarding particu state's ability te unfuence dhe intraaionl arena cannot be ignored inthe new gob. alae system. Tiss becaue the aetudes of these actors nay shape the ‘oti af the saz of dhe stat and influence ie intemational approach 8d how othe actors respond fits actions Thothallisoa, 20080) Tnemational exganisations, govemments anda number of iter: governmental organistions have put increased presure on Iceland 0 ontuibute more to the international community inthe nt decade For instance thishasbes th cae with NATO, the Would Bank, the BEA and the UN anditsmember states, There has also been rowing presse fom ‘orgenisations working on human rights and development assistance. The Us govemment aso put considerable presse on lela from the ezly to mi 1990s 0 conte to sown defence and to shad duis wih [NATO member sates, Moreover, in 2005, as the debate on whether or not to cosine ‘the campaign to seek membership on the Security Council intenifiod in Ieland, both the prime minister and the foreign minister stated ‘hat they were under considerable pressure fom their Norse coun ‘expats to continue the campaign (Morambalis, 2005 2008. The Dine ministers of the other four Nowdc tates raised thet concerns Shout ielands potential withdrawal of te Secrty Counc appiation. ‘They emphasised the noed fora Nordic sate to be represented tthe Counas negation able and stated that they would be rey clap pointed if Iceland widhdzew its aplication. Furthermore, dey argued that one of them would have campaigned forthe seat nthe 2008-2010 evod in the Counel if feand had not decided to run in 1998 — and that twas now to lite for them to start campaign (MrgunbaN, 20050)" 135 Te Diploma of Sma Sater (One could argue thatthe views ofthese actors regarding lesan Insertional capabilities has changed in recent yeas since Island hat ‘become mot afvent and gradually more si asertive internationally “This external peste has had several smpieston for elaine ‘tonal ade For instance, it has edt te establishment ofthe ICRU (Bates and Torhasson, 2006) and a considersbeinrene in Iceland ‘evelopment si, which his been much les, a 4 proportion of GDP, tna that given by te other Nore states Har, 197; Inglison and Haale, 2009, ‘The case of whaling provides an example ofthe presre on Ie Jand to partpate inthe Intemational scene and t follow is noms and rules. In 2002 Iceland found self obiged to rejoin the intema ‘onal Whaling Commission (HVC) having lft it ten years eer in _proes at ot being allowed to conte shaling fr commercial pute | poses. The decision to withdraw from the [WC was ln sap contrast to the positon adopted by oeher whaling nations, such as Norway and Japan, which continued fo work wth, and promote the pli i, the IWC. This attempt to challenge the athonty ofthe TW can Be seen in the light ofthe tadtonal view of Ieelandiegoreraments to have the right to make thee ‘oun dein egret of Intemational ries sch a the mater ofthe lean ishing re ~ ad del with {sus outside intentional ogansstions. In the 1980s Tels made anattempt to start whaling agin ving stopped whaling lor scene purposes in 1989 (afte international pressure), by resting an inter ‘ona organisation, the North Atlante Marne Mammal Commission, together with other Whaling nations. This approach filed completely (lalérsson and Seeinsson, 2001) and Iceland sought to wefan the (Commision i order be able o stat whaling for ssentifie purposes. Thus, leland decided to accept international rules concerlng Wha. ing that, to wok within the IWC, which as done since 2003 ‘This brought Fostand ino lie with other whaling nations thst accept te WC anthony and cooperate with countees worldnie within ts "To summaree, the presute fom the intemationsl

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