Allies in Reykjavík

Hello,

Iceland has not been short of visitors this autumn. Since the last Briefing it has hosted Ukraine’s foreign minister, the defence ministers of the Joint Expeditionary Force, the US Secretary of State, the leaders of Greenland and the Faroe Islands, and Canada’s foreign minister. Our lead follows Marco Rubio’s visit: more US presence on offer, free trade off the table. Also in this issue: the government has finally itemised what it counts as defence spending: 0.92% of GDP, against a NATO commitment of 1.5% by 2035. The National Security Council has taken up the Chinese-funded observatory at Kárhóll. The Central Bank is building fallbacks so that payments keep working if links abroad fail. And a new Varða analysis finds the police special unit’s armed call-outs up sevenfold since 2014, while the unit has stayed the same size. This one is a long read. A month has become a long time in Icelandic security, so from now on the Briefing comes out every two weeks.

Rubio in Reykjavík: more presence possible, free trade off the table

The United States is open to a larger role in Iceland, Secretary of State Marco Rubio said in Reykjavík on 6 October, but only with Iceland’s consent. “We would be open to having those conversations to see what we can do together,” he said. Threats in the Arctic are growing and more varied than before, he added. The visit, the first by a US Secretary of State since 2021, followed Prime Minister Kristrún Frostadóttir’s meeting with President Trump at the UN General Assembly in September. It came two weeks after the US, Denmark and Greenland signed a defence agreement that allows the US to establish two new defence areas in Greenland. The agreement matters a great deal to Iceland, the Prime Minister wrote, “since we base our security on strong, shared defences in this region”. It “strengthens security and defence in our part of the world and underlines the importance of NATO”, Foreign Minister Þorgerður Katrín Gunnarsdóttir said.

The Foreign Minister called the talks with Rubio “good and useful”. Defence and security were much discussed, she said; Rubio’s ambition was to strengthen NATO’s presence in the North Atlantic and the Arctic, and the importance of the bilateral 1951 Defence Agreement, under which the US arranges Iceland’s defence on NATO’s behalf, was underlined. Rubio also pushed back on Politico’s reading of August’s Northern Viking exercise, the first without US ships or aircraft, as a US pullback. US ships and aircraft were needed for the war with Iran and in the Indo-Pacific, he said; he did not think the decision was permanent, and US personnel still took part in the exercise, including its planning. Asked about President Trump’s map showing Iceland in the colours of the US flag, Rubio said he was not in Iceland to talk about social media posts. The Foreign Minister, who had summoned Ambassador Billy Long over the map in September and raised it with the US Deputy Secretary of State, said the matter had been dealt with: “We don’t want anyone toying with Iceland’s sovereignty, whoever it may be. We got clear answers.” Davíð Stefánsson, chair of Varðberg, an Icelandic association that promotes Western cooperation, said that while Washington is reducing its presence in Europe and many European allies doubt how far they can rely on it, the visit confirmed US defence commitments to Iceland.

On trade, Rubio all but ruled out a free trade agreement, saying the time for such agreements had passed, an answer that cut across the opposition Independence Party’s recent call for one. He left room for narrower bilateral deals. Work will now begin on a long-sought agreement on mutual inspection of pharmaceutical manufacturing, the Foreign Minister said; US companies are to make a dedicated visit to Iceland, and the Prime Minister said she had sensed a clear will in Washington to deepen cooperation. Rubio, for his part, said that given Iceland’s importance, the next visit by a Secretary of State would not be long in coming.

In the two days after the visit, the government met its Canadian and West Nordic counterparts in Reykjavík. The Foreign Minister and Canada’s Anita Anand backed “a strengthened NATO presence and posture in the Arctic and North Atlantic region” in a joint statement. The Prime Minister hosted Greenland’s premier, Jens-Frederik Nielsen, and the Faroese prime minister, Beinir Johannesen, the first time the three West Nordic heads of government have met in one of their countries specifically to consult; they agreed to meet regularly, in each country in turn. Nielsen called Greenland’s agreement with the US and Denmark good for Greenland, NATO and Europe. There is great international interest in the region, in its politics and in investment, the Prime Minister told reporters, but the three countries must set the course themselves.

JEF ministers meet at Keflavík as Canada seeks to join

Defence ministers of the Joint Expeditionary Force (JEF), the UK-led group of ten Northern European states, met at Keflavík Air Base on 1–2 October, hosted by Foreign Minister Þorgerður Katrín Gunnarsdóttir. Their joint statement names the Baltic Sea region, the High North and the North Atlantic as the group’s “core and interconnected area of strategic interest” and places it “below the threshold of Article V”, complementing NATO. Ukraine, whose defence minister joined by video link, took part in the JEF’s main exercise, Lion Protector, for the first time this year, and the ministers agreed to deepen its involvement. Russian sabotage will not deter their support for Ukraine, they said; JEF nations “pose no threat to Russia, but Russia should be in no doubt that we will defend ourselves.”

Canada’s Defence Minister David McGuinty attended as a guest, two weeks after Prime Minister Mark Carney announced Canada’s application to join. Canada’s presence in the North Atlantic will grow, McGuinty told RÚV, and Iceland’s location matters to it. “We are already here,” he said, pointing to an anti-submarine patrol aircraft. Canadian troops and more equipment could follow, and he had met Icelandic companies whose technology Canada could use. Canadians are worried, he added: “The Russians show no sign of letting up.” With Canada in the JEF, Iceland would sit geographically at the centre of a clearer security bridge across the North Atlantic, former minister Björn Bjarnason noted. The ministers are preparing a recommendation on Canadian membership for JEF leaders, who next meet in Reykjavík, in the spring.

Iceland weighs drone cooperation with Ukraine

Ukraine’s Foreign Minister Andrii Sybiha met Foreign Minister Þorgerður Katrín Gunnarsdóttir and Alþingi’s Foreign Affairs Committee in Reykjavík on 19 September. Iceland’s readout mentioned continued support and Ukraine’s need for air defence before winter. Sybiha’s own statement went further: the ministers “agreed to accelerate preparations for the signing of the Drone Deal between our countries” and discussed Ukraine’s cooperation with the JEF. Ten days earlier, when President Zelenskyy stopped at Keflavík Airport, the Foreign Minister had pledged continued support, “particularly in air defence and energy”.

The war has made Ukraine a global drone power, Sybiha told RÚV, ready to share what it knows with friends, Iceland included. Iceland, like every European state, is exposed to drone attacks, military historian Erlingur Erlingsson said in a later RÚV analysis, and it would be prudent to consider how to strengthen its defences. Varða’s report with Cornell University’s Brooks Tech Policy Institute, published in June, found gaps in how Icelandic authorities assess drone threats, respond to incidents and coordinate the protection of critical infrastructure. Asked about the deal Kyiv says is in preparation, the foreign ministry told mbl.is that Iceland is considering cooperation on drone defence and the protection of critical infrastructure, but that “no decision has been taken”.

Calls for an Iceland–Greenland trade agreement

Viðskiptablaðið reported two new proposals for an Iceland–Greenland trade agreement. Bryndís Haraldsdóttir, an Independence Party MP and former President of the Nordic Council, wants a bilateral agreement within this parliamentary term, modelled on the Hoyvík Agreement, Iceland’s broad free trade agreement with the Faroe Islands. Investor Heiðar Guðjónsson proposes that Iceland lead work on a free trade agreement between Greenland, Iceland and the United States, pointing to the recent agreement by which the US, Denmark and Greenland expanded the 1951 defence agreement on Greenland. A separate resolution before Alþingi, tabled by Njáll Trausti Friðbertsson and five other MPs, goes further, calling for talks with the US, the UK, Canada, Norway, Greenland and the Faroe Islands on a North Atlantic free trade area, with cooperation on subsea cables, maritime surveillance and defence. Bryndís and Heiðar set out their proposals in the October issue of Tímarit Vörðu, Varða’s journal on national security; both articles are in English: The nearest neighbours in the Arctic and Greenland’s historic opportunity.

Government itemises defence spending, with gaps in the information

The foreign and finance ministries have sent Alþingi’s Budget Committee the government’s first breakdown by budget heading of what it counts as security and defence spending, after more than a year of requests. It puts defence-related public spending in 2026 at ISK 48.9 billion, or 0.92% of GDP. Central government accounts for ISK 42.4 billion of that, across 13 budget headings: direct defence cooperation (ISK 10.8 billion), then policing, transport and the Coast Guard, with smaller sums under media and research funds. Public companies and municipalities account for the remaining ISK 6.5 billion, mainly for the power grid, communications, airports and utilities. The figures rest on a preliminary assessment, and the ministries say more detailed work on what each budget line should include is under way.

In real terms, the ministries project that all growth to 2031 comes from direct defence cooperation, which rises to ISK 15.1 billion. Total spending rises only from 0.92% to 1% of GDP. The defence-related sums counted under policing stay flat, and those under the Coast Guard fall from ISK 7.9 billion to 7.4 billion; the Coast Guard has told the Budget Committee it cannot maintain current operations on next year’s allocation. Iceland’s commitment to NATO is 1.5% by 2035, about ISK 77 billion a year on projected GDP for 2026. Varða’s submission on the 2027 budget bill calculates that about 85% of the increase needed lies beyond current plans. It makes seven proposals: three on planning and transparency (a breakdown before Alþingi’s second debate on the bill, an annual overview of spending, a costed long-term plan) and four on needs it says cannot wait, from fuel reserves to drone response.

Coast Guard at 100: director calls for a clearer legal framework

Iceland’s Coast Guard marked its 100th anniversary on 26 September as the institution Icelanders trust most, for the 16th year running in Gallup’s survey. At the celebration, the Justice Minister, Þorbjörg Sigríður Gunnlaugsdóttir, said that as hybrid threats blur internal and external security, civilian security and law enforcement are the first line of defence, with the Coast Guard at the centre. Its staff run NATO’s air defence system in Iceland, which the minister called one of the country’s most important contributions to the alliance. Director General Georg Lárusson called for a clearer legal framework for these security and defence tasks.

The call has a record behind it. In February the National Audit Office warned that the Coast Guard’s split funding, with its defence tasks paid for by the foreign ministry and the rest by the justice ministry, will come under more strain as defence spending rises. Its 2022 audit asked the government to define the readiness it expects and set a long-term investment plan; the follow-up found only one of nine recommendations fully met. In 2024, helicopter rescue within six hours was available across Iceland’s search and rescue area only 57% of the year, against the ministry’s own target of 70%. The ministry told the auditors there had been no willingness to raise the Coast Guard’s appropriations, and that it had cut patrol sailings and helicopter flying hours; the auditors say those cuts affect core rescue and response capacity. None of the Justice Minister’s 17 planned bills concerns the Coast Guard.

Armed call-outs up sevenfold, special unit the same size

Armed call-outs of the National Police Commissioner’s Special Unit rose more than sevenfold, from 56 in 2014 to 424 in 2025, according to Varða’s analysis Gleym mér ei (Forget-me-not), published on 24 September. The unit’s strength has barely changed since 2008: 46 officers in spring 2025, ten short of the 56 authorised. Most call-outs concern knives, though firearms call-outs reached 74 in 2025, more than all armed call-outs in 2014. The unit also handles dangerous arrests, protection duties and operations at sea, such as boarding the Bandero, a ship of the anti-whaling Paul Watson organisation, in July. These tie up officers while the rest must cover the country. The report expects sabotage linked to foreign states and more violent organised crime, both rising in Europe, to add to that load. No recent published assessment underpins the authorised strength. Varða proposes funding the ten vacant posts first, at an estimated ISK 300–400 million a year (about EUR 2–3 million), and a regular published assessment of the unit’s needs.

Responding to the report, Karl Steinar Valsson, head of the Commissioner’s Analysis Department, told mbl.is: “We’ve managed, but it’s a strain.” The Commissioner has pressed the government for years to fund the vacant posts, he said, and told RÚV: “Public safety is expensive.” Asked about the findings, the Justice Minister said the unit could easily be 70–80 strong. Her plan, presented the same day, to merge the nine police districts into three would leave larger districts better able to handle difficult call-outs, she argued. A bill on the merger goes to Alþingi in November; whether it will address the unit’s staffing is not yet clear.

Russian threat under review; Iceland’s threat assessment still unpublished

Iceland’s assessment of the Russian threat is being reviewed after Danish military intelligence warned that the threat will grow, RÚV reported on 24 September. “We take the threat seriously,” said Jónas Allansson, head of the foreign ministry’s defence directorate, adding that the assessment is under constant review, in close contact with allies including Denmark, Germany and Poland. Alþingi’s new security and defence policy says its implementation should “take account of threat assessments”. The only assessment published with it is a section of about three pages in the explanatory notes, drawing on allied and NATO assessments, which concludes that the threat to Iceland “is of the same nature as that facing other NATO states”. Practice differs in the other Nordic states, which publish more detailed assessments for the public: the Danish intelligence assessment behind the review is public, and Sweden and Denmark published national risk assessments in 2025, Finland in 2023.

National Security Council takes up China-Iceland observatory at Kárhóll

Icelandic authorities, including the National Security Council, have taken up the China-Iceland Arctic Science Observatory at Kárhóll in north-east Iceland, the Prime Minister’s Office said in a reply to RÚV published on 16 October. Its reason was general: European security services, Nordic ones among them, have warned that Chinese intelligence services gather information illegally by varied means, and that support for research and technology is known to be used to gain access to information. According to the Office, Icelandic law applies at the station, and Icelandic institutions have an overview of the equipment and access to the premises and research data on request. It did not say when the council discussed the station, whether the examination continues, or what it has found.

In 2023, under the previous government, the prime minister told Alþingi the station had never come before the council, and the foreign minister said no national security assessment was made when it was set up and that the ministry had no legal power to set conditions on it. In March 2025 the then head of security and analysis at the National Police Commissioner’s office said China conducts espionage in Europe, Iceland included, and referred specifically to Kárhóll; a police assessment, he said, pointed to uncertainty about the station’s activities. China’s ambassador, He Rulong, rejected the claims. The station, run jointly by Icelandic and Chinese research institutions, cost about ISK 1 billion (about EUR 7 million) to build, paid entirely by China’s Polar Research Institute, which leases it from an Icelandic foundation for 99 years. It was largely completed only recently.

Economic security: Central Bank builds fallbacks for payments

Iceland’s Central Bank is building fallbacks so that payments keep working if connections fail. Its Financial Stability Committee warned on 23 September that advances in AI “can increase the speed, scope and complexity of cyberattacks”, and that financial firms must strengthen their defences to match. One safeguard is already in place: card payments that work without an internet connection. Deputy Governor Tómas Brynjólfsson had set out the reasoning five days earlier. Economic security, he said, is about more than supplies, cables and reserves. It is also about trust that money keeps its value and can be spent. Of every 100 krónur in Iceland, 98 are bank deposits and 2 are notes and coin. So that trust rests on bank systems and card networks.

The Bank plans to move payments between banks to the European Central Bank’s system by 2028, as Sweden and Denmark have done; its own analysis found the larger system has more capacity and round-the-clock monitoring. That system is reached through subsea cables, so the Bank is also building a domestic fallback that works without links abroad. Plastic cards have worked offline since July, and the Bank hopes phones will follow by year-end. The deputy governor was blunt about dependencies. Iceland’s financial system relies on a few large international firms, many of them American and exposed to that government’s “policy and whims”. Everyday payments rest almost entirely on two international companies, which he called “obviously unacceptable” for a sovereign state. The Bank cannot fix this alone, he said. A tender for domestic payments infrastructure, which would let banks offer direct bank-to-bank payments through phone apps, is to be announced “soon”.

Iceland plans new subsea cable; operator wants cables kept civilian

Korda, the state-owned company that runs three of the subsea cables connecting Iceland to the outside world, plans another, AUÐUR, to Irvine Bay in Scotland. It is due in service around the turn of 2029–2030, at a cost of about ISK 10 billion (about EUR 70 million), Morgunblaðið reported, and will replace FARICE-1, in use since 2004. A link to Tusass Connect, a planned cable from Greenland to Denmark via the Faroe Islands, is also under consideration. Separately, the Greenlandic and Danish governments are studying a cable to Tasiilaq in East Greenland, probably running to Iceland, which the paper says could also monitor ship and submarine traffic in the Denmark Strait. Korda’s chief executive, Þorvarður Sveinsson, is not keen. Korda’s cables should serve civilian purposes only, he said: “Anything else invites the risk of crossing a line we should be wary of.”

US AI company in talks over large data centre at Bakki

London-based Akur Capital plans a 100 MW data centre at the Bakki industrial site near Húsavík, costing about USD 1 billion (ISK 120 billion), Vísir reported. Akur says it may not name the customer, a large US cloud and AI company, for security reasons; RÚV’s sources say it is Microsoft, and Akur would neither confirm nor deny it. Talks with the national power company, Landsvirkjun, on energy delivery are under way. The data centre would draw on the grid connection and substation built at Bakki for heavy industry. Their main user until now, the majority German-owned PCC BakkiSilicon, sold most of its silicon metal in Europe and halted production in July 2025 as low-priced Chinese exports disrupted the market. In November 2025 the EU put protective tariffs on some Icelandic metal exports, despite the EEA Agreement, but not on silicon metal, so PCC gets no protection from Chinese competition.

Phase-out of 2G and 3G exposed gaps in emergency-call oversight

The serious effects on emergency calls of switching off Iceland’s 2G and 3G mobile networks came to light only just over two months before the networks were due to close, according to a report by the Electronic Communications Office. Some 4G phones that otherwise work normally cannot reach the 112 emergency number without the older networks, and the shutdown was postponed to 1 June 2026. The decision lay with the operators, and the regulator had no power to stop it, its director, Hrafnkell Gíslason, told RÚV. The office wants stronger powers to intervene before more old systems are retired, among them the TETRA radio network used by the emergency services, which RÚV reports is due to close in the coming years. It also wants a clearer legal framework for the emergency line operator Neyðarlínan, because no one clearly supervises an emergency call from end to end. “This is a broken chain,” the director said.

Iceland’s Baltic Sea presidency puts resilience first

Senior officials of the Council of the Baltic Sea States met in Reykjavík on 15–16 September, the first such meeting since Iceland took over the presidency from Poland on 1 July. Delegations from the Nordic and Baltic states, Poland, Germany and the EU visited the Reykjanes peninsula to hear how a local energy company and the town of Grindavík have coped with volcanic eruptions. Resilience is the presidency’s theme. Since Russia left after its full-scale invasion of Ukraine, the council has become a forum for consultation on regional security, the presidency programme says, and Iceland will prioritise follow-up of a declaration adopted in Sopot, Poland, this year on the shadow fleet, hybrid threats and risks to critical infrastructure and maritime safety.

Westfjords: start resilience spending with the rescue teams

Iceland’s remote Westfjords want their infrastructure needs treated as part of Arctic security. Gylfi Ólafsson, mayor of Ísafjörður, the region’s main town, told the Arctic Circle Assembly in Reykjavík that a regional report had rated what the area needs anyway, such as mobile coverage, power and airports, by its value to both daily life and security. Rescue teams came first. Iceland’s search and rescue teams are mostly volunteers who pay for much of their equipment through donations. “If the state intends to put more money into resilience, it would be natural to start with the rescue teams,” he said. The report does not call for a military build-up, he added. The region already has a radar station on Bolafjall, built in the late twentieth century and still in operation.

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