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Viewing cable 08REYKJAVIK224, ICELANDIC CENTRAL BANK ASSERTS RUSSIAN LOAN IS 95 PERCENT

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Reference ID Created Released Classification Origin
08REYKJAVIK224 2008-10-08 16:04 2011-01-13 05:05 CONFIDENTIAL Embassy Reykjavik
VZCZCXRO1452
OO RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHRK #0224 2821650
ZNY CCCCC ZZH
O 081650Z OCT 08
FM AMEMBASSY REYKJAVIK
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3834
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 000224 
 
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