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Viewing cable 08REYKJAVIK221, ICELANDIC FINANCIAL CRISIS: AS EMERGENCY POWERS GO INTO

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Reference ID Created Released Classification Origin
08REYKJAVIK221 2008-10-07 17:05 2011-01-13 05:05 UNCLASSIFIED Embassy Reykjavik
VZCZCXRO0441
PP RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHRK #0221 2811730
ZNR UUUUU ZZH
P 071730Z OCT 08
FM AMEMBASSY REYKJAVIK
TO RUEHC/SECSTATE WASHDC PRIORITY 3830
INFO RUCPDOC/USDOC WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
UNCLAS REYKJAVIK 000221 
 
USDOC FOR LEAH MARKOWITZ 
TREASURY FOR LAWRENCE NORTON 
STOCKHOLM FOR FCS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PGOV IC
SUBJECT:  ICELANDIC FINANCIAL CRISIS: AS EMERGENCY POWERS GO INTO 
EFFECT, RUSSIANS OFFER LOAN 
 
REF: Reykjavik 219 
1. (U) Summary: As the financial crisis and uncertainty in Iceland 
continues, the Russian offer of a 4 billion Euro (5.4 billion USD) 
loan is getting considerable attention.  The Prime Minister and 
Minister of Commerce held a joint press conference this morning to 
update on the Government's takeover of Landsbanki and made polite 
digs at foreign governments who did not offer assistance.  The 
Minister of Industry (current Acting Foreign Minister) was not so 
diplomatic in a morning radio interview and accused the U.S. of 
giving Iceland the middle finger.  Leader of opposition Progressive 
Party Gudni Agustsson asked the Althingi (Parliament) to send Putin 
a thank you note and declared that President Bush did not turn out 
to be a friend when needed.  The Prime Minister's office has denied 
British media speculations that the price of the Russian loan would 
be landing rights at the former US Naval Air Station in Keflavik. 
End Summary. 
2. (U) Prime Minister Geir H. Haarde and Minister of Commerce 
Bjorgvin G. Sigurdsson held a joint press conference late this 
morning to provide updates on the current financial crisis. 
Sigurdsson said the Financial Supervisory Authority of Iceland (FME) 
and Landsbanki bank had been meeting all night and the FME has taken 
control of Landsbanki under the emergency powers granted by Althingi 
(Parliament).  The bank will be split into two entities, one that 
deals with domestic operations and another that deals with foreign 
operations.  Sigurdsson described it as a necessary step to ensure 
the continued orderly operation of domestic banking.  After speaking 
in Icelandic with local press, Haarde took questions in English from 
the mostly British reporters who were concerned with what these 
developments mean for the depositors of Icebank, a subsidiary of 
Landsbanki with large operations in the UK.  Haarde said that he 
could not really answer, but he thought the assets of the bank would 
cover these deposits and depositors need not worry. 
3. (U) At the end of the conference, a reporter asked about the 
pending currency loan from Russia and Haarde responded that Iceland 
had requested loans and other help from its friends; Nordic 
countries had responded positively, but others had not.  He added 
that in a situation like that, Iceland must look for new friends. 
Ossur Skarphedinsson, Minister of Industry and currently the Acting 
Foreign Minister, was more blunt in a morning radio interview.  He 
said Iceland had looked to its friends for assistance on the 
financial crisis and some turned out to be not so much of a friend, 
like the U.S.  He said it hurt, and added that after about 50 years 
of a special relationship with the U.S., the only thing Iceland got 
now was the middle finger.  Adding to the US bashing was Gudni 
Agustsson, Chairman of the Progressive party (in opposition), who 
wanted the Althingi and the government to send Putin a thank you 
note for his support to the Icelandic nation.  Agustsson said that 
Bush did not turn out to be a friend when needed. 
4. (U) It is still unclear if Iceland will take Russia's offer of a 
4 billion Euro (5.4 billion USD) loan.  The Icelandic Central Bank 
reported that a team will go to Moscow to work out the details.  The 
British publication Spectator immediately reported on its website 
that the price for the loan was the ability of Russia's military to 
use the former U.S. military base in Iceland.  Asked at the press 
conference whether the Russians would get access to any base 
facilities in return for a loan, the Prime Minister said no.  His 
Foreign Policy Chief assured the Ambassador that the government 
regarded the loan offer as "friendly economic gesture from Russia," 
but there was no connection to Keflavik and there has been no change 
in Iceland's foreign or security policy. 
 
VAN VOORST