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Viewing cable 08MOSCOW3010, ICELAND EMBASSY: RUSSIAN LOAN "STRICTLY

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Reference ID Created Released Classification Origin
08MOSCOW3010 2008-10-09 14:02 2011-01-13 05:05 CONFIDENTIAL Embassy Moscow
VZCZCXRO2300
PP RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHMO #3010 2831426
ZNY CCCCC ZZH
P 091426Z OCT 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 0321
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHRK/AMEMBASSY REYKJAVIK PRIORITY 0051
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
C O N F I D E N T I A L MOSCOW 003010 
 
SIPDIS 
 
STATE FOR EUR/RUS, EUR/NB, EEB/IFD 
TREASURY FOR TORGERSON, NORTON 
NSC FOR ELLISON 
 
E.O. 12958: DECL: 10/01/2018 
TAGS: EFIN ECON PREL RS IC
SUBJECT: ICELAND EMBASSY: RUSSIAN LOAN "STRICTLY 
FINANCIAL;" CLOSE BUT NOT DONE YET 
 
REF: REYKJAVIK 224 
 
Classified By: Charge d'Affaires Eric Rubin, Reasons 1.4 (b/d). 
 
1.  (C) Iceland's Moscow Deputy Chief of Mission, Magnus 
Hannesson, told us that the proposed loan from Russia is a 
strictly financial transaction.  He insisted Iceland's 
economic fundamentals are sound but said the country needs 
assistance providing liquidity to its banking sector. 
Iceland's monetary authorities had begun soliciting support 
from friends and allies last spring, but to no avail. 
Hannesson explained that his government had felt it had no 
choice but to consider less conventional sources of 
financing, and that Russia was one of those sources.  Loan 
discussions with Russia's Finance Ministry and Central Bank 
(CBR) began in the summer. 
 
2.  (C) Hannesson confirmed that a team of officials from 
Reykjavik would arrive the week of October 13 to negotiate 
the loan.  Echoing Icelandic Central Bank statements to 
Embassy Reykjavik (reftel), he expressed confidence that the 
4 billion Euro loan agreement would be concluded very soon. 
Hannesson said he would participate in the meetings between 
the GOI delegation and the GOR next week and would provide us 
with a readout. 
 
------------------------------------- 
No Effect on Iceland's Foreign Policy 
------------------------------------- 
 
3.  (C) Hanneson emphasized that Iceland's foreign policy 
would not change as a result of a loan agreement with Russia. 
 He reiterated the loan was strictly financial and not a quid 
pro quo.  Iceland was in need of funds; Russian officials had 
determined that Iceland was an acceptable risk.  The GOI 
would be grateful to Russia but would not provide access to 
military installations or change its stance on any issue in 
exchange for the loan. 
 
------- 
Comment 
------- 
 
4.  (C) The Russian loan to Iceland strikes us yet another in 
a proliferating series of GOR "vanity" projects that Russia 
may no longer be able to afford.  The financial crisis has 
hit Russia hard and the Russian economy is starting to feel 
the effects.  The loan to Iceland suggests that the GOR has 
still not come to terms with this, nor with the country's 
rapid fall from economic grace.  End Comment. 
RUBIN