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Viewing cable 08REYKJAVIK223, ICELANDIC CENTRAL BANK ASSERTS RUSSIAN LOAN IS 95 PERCENT

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Reference ID Created Released Classification Origin
08REYKJAVIK223 2008-10-08 16:04 2011-01-13 05:05 CONFIDENTIAL Embassy Reykjavik
VZCZCXRO1444
OO RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHRK #0223 2821643
ZNY CCCCC ZZH
O 081643Z OCT 08
FM AMEMBASSY REYKJAVIK
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3833
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC IMMEDIATE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
C O N F I D E N T I A L REYKJAVIK 000223 
 
SIPDIS 
 
STATE FOR EUR/FO A/S Dan Fried 
 
E.O. 12958: DECL: 10/07/2018 
TAGS: EFIN ECON PGOV IC
SUBJECT: ICELANDIC CENTRAL BANK ASSERTS RUSSIAN LOAN IS 95 PERCENT 
SURE 
 
REF: Reykjavik 221 
 
Classified By: DCM Neil Klopfenstein for reasons 1.4 (b) and (d). 
 
1. (C) Sturla Palsson, Director for International Affairs and Markets 
at the Icelandic Central Bank told EconOff that the 4 billion Euro 
loan offered by the Russians is 95 percent certain to happen.  The 
Icelanders have been assured by the Russians that the unprecedented 
loan will go through and that it has "been approved by the highest 
level in Russia." Palsson is chairing a five person committee from 
Iceland that will travel to Russia on Monday, October 13.  Other 
participants include two Russian speaking Icelanders (a lawyer and a 
banker), a representative from the Ministry of Finance and an 
Economist from the Central Bank.  The team will negotiate the term 
(length of loan) and discuss what documentation or format is needed 
to complete the loan. 
 
2. (C) Since the Acting Foreign Minister yesterday publicly stated 
the U.S. had rebuffed Iceland's pleas for help (see reftel), the 
Embassy has been working to determine with whom the Icelanders spoke 
in the U.S. and supposedly approached for help in their ongoing 
financial crisis.  Palsson said the Central Bank had contact with the 
Chairman of the New York Federal Reserve, Timothy Geithner, as well 
as with additional officials from the Federal Reserve in Washington. 
They have not talked since last week.  Palsson confirmed that the 
Central Bank had not spoken with anyone at the U.S. Treasury 
Department.  The Ministry of Finance's Director General of the 
Economic Department, Thorsteinn Thorgeirsson, said that aside from an 
October 6 conversation between Treasury Dept Under Secretary Dave 
McCormack and the Finance Minister, the only other official contact 
the ministry had with the US Government was with Treasury's Iceland 
Desk Officer Lawrence Norton. 
 
3. (C) Palsson said the Central Bank's Governors were talking to 
their Nordic colleagues, but the Bank has not taken advantage of the 
swap lines in place.  He said there has been talk of loans and a 
number of other possibilities with the private sector and some in the 
public sector, but that it was too early to say and they had nothing 
in hand.  Palsson said the goal was to back up liquidity to stabilize 
the currency and increase or rebuild confidence in the currency.  He 
said, "Iceland currently has 3 to 4 billion Euro, the Russian loan 
would take us to 8 billion Euro and 10 to 15 billion Euro would be 
optimal. At that point we could cover imports of goods and services 
for two years." 
 
4. (C) Palsson said the Central Bank would be very pleased to hear 
from the U.S.  "Having the US and the US Government as an ally in a 
crisis would be hugely important for confidence."  Palsson said that 
in his capacity as Head of the International Affairs and his role as 
coordinator between the Icelandic parties for any foreign loans, he 
would be the primary contact point for outreach from the U.S. 
 
 
 
 
VAN VOORST