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Russia is our new best friend, redux

One piece of news that went largely unnoticed in all the hoopla surrounding the EU accession talks last week was the one about Russia having approved a USD 500 million loan to Iceland.

As some of you may recall, talk of a Russian loan first surfaced last year, just as our financial system was beginning to melt down. That whole episode was a bit of a farce and has been held up as yet more proof of Davíd Oddsson’s incompetence – that he went ahead and announced the Russian loan as a done deal when … errrm … it wasn’t.

At the time, a new cold war seemed to be brewing [what with Putin getting all psychotic on us and old Georgie Bush still installed in the White House, I’llsaynomore] and the speculation was that Russia’s ulterior motive was to gain hold of Iceland as a strategic base – just as the US had used Iceland as a strategic base for decades, or until 2006 when they unilaterally hauled ass out of here. At any rate, it seemed very strange that suddenly Russia wanted to be our new best friend – particularly as the US was perceived to have turned its back on Iceland a few months earlier when this country was left out of an important currency swap agreement [which, in hindsight, may have been perfectly reasonable in light of all the shit and corruption that has surfaced here over the last few months]. The words of old Geir Haarde, then-PM of Iceland, were certainly ominous enough:

In such circumstances, one has to look for new friends.

So in the wake of the whole premature-announcement thing, talk of the Russian loan seemed to fade into the distance, like an echo of something vague. Until last week, that is, when the aforementioned news item appeared on the Russian website barentsobserver.com. This paragraph was kinda interesting:

Russia has only minor economic relations with Iceland. The North Atlantic state remains however a geo-strategically highly interesting partner for Russia. In addition, it is believed that Russian corporate interests have invested heavily in parts of the Icelandic economy.

Er … YEAH. Now, this part:

The North Atlantic state remains however a geo-strategically highly interesting partner for Russia.

Is a no-brainer. The Arctic ice is melting and a new shipping route is opening up that would allow for much more efficient transport for the Russians than before. This in itself could have dramatic implications for this country, what with huge tankers potentially passing through our waters and even stopping off up north for refueling and a spot of maintenance and boozing and whatever else it is that sailors do when they stop in ports [ahem].

This part, however, has our YT particularly intrigued:

In addition, it is believed that Russian corporate interests have invested heavily in parts of the Icelandic economy.

OK – hold up. Russian corporate interests have invested heavily in parts of the Icelandic economy? Um … what Russian corporate interests?? Personally I’m not aware of ANY Russian corporate interests in this country. It’s not like we have a LADA spare parts factory on the West Fjords, or a caviar processing plant on Snæfellsnes. UNLESS … they’re referring to the persistent rumours of money-laundering services allegedly provided by Landsbanki back in the days when it was still owned by the two Björgólfurs. Could THOSE be the corporate interests they’re referring to?

At any rate, they seem to know a lot more than we do, because according to barentsobserver.com:

… analysts have also speculated about a possible new role of Russia on the island.

And on that note, I’ll leave you with the only Russian word I know.

BARISHNIKOV!!*

WEATHER SO NICE THAT WE JUST CAN’T BE BOTHERED
To think about anything heavy or messy or remotely Slavic. It has been so beautiful here these last few days – warm and sunny and positively tropical [well, if the tropics were located in the Arctic]. I can totally relate to the mañana mentality these days. I could happily flop around by the pool for days on end and do nothing else. Apparently, though, there was thunder and lightning at Þingvellir yesterday – while 50 km away, here in Reykjavík, EPI and I were lying on sun loungers dozing off with iPods attached to our ears. Currently a sweltering 17°C [63F] – and it’s almost midnight! The sun came up at 3.52, will go down in a few minutes at 11.13.

*Yes yes, I know it’s a NAME. But it means “ballet”. Also, “defecting to the United States”.

Comments

comments

Comments on this entry are closed.

  • hildigunnur July 19, 2009, 11:51 pm

    oooooops! 😮

  • Carl Mosconi July 20, 2009, 8:16 am

    It would be naive to believe that Russia is loaning this money as a friendly gesture wanting nothing in return.
    By the way, the U.S. did haul ass but not before leaving hundreds of completed buildings containing several hundred thousand square meters of space which the Icelandic government is using today.

  • David Raven July 20, 2009, 8:35 am

    Great, so we in Britain propose punishing loans for Icelandic taxpayers when other more sensible options are available, leaving your government in need of a miserly $500m loan from Russia. I just hope my own government has thought this through and that Icelandic taxpayer don’t ever renege on the Russia deal! We should be reminded that London is closer to Reykjavik than any other major European city!

  • Lee July 20, 2009, 9:39 am

    The key question is: what are the terms and conditions of the loan? There is probably a freedom-of-information argument for a loan agreement of this importance to be published, especially if parliament doesn’t get an opportunity to ratify it…

  • Dave Hambidge July 20, 2009, 11:23 am

    Sorry to be a comment pooper, but I think you’re wrong David Raven.

    London to Reykjavik is 1175 miles, to Paris 212 and Berlin 570.

    Oslo to Reykjavik is 1080.

    All of above by direct lines on google earth so maybe you meant something else?

    best

    dave (or should it be Daviski?)

  • David Raven July 20, 2009, 12:11 pm

    Sorry misunderstanding about the distance. I meant to say London is probably closer to Reykjavik than say Paris to Reykjavik… and so on.
    Not that this particularly matters in global economic terms. It is just that I have an impression that people in the UK are unaware how geographically close a neighbour Iceland is to us. The idea of a new Russian port in 2020 or some other distant date just above Scotland will not help détente in the UK. I am concerned that our government in Britain, is more concerned with covering up its own banking mishaps rather than being a true friend to Iceland – and leaving the door wide open for others.

  • Lee July 20, 2009, 1:09 pm

    And what about Dublin (capital of Ireland), Edinburgh (capital of Scotland), and Cardiff (base for Torchwood)…

  • Ljósmynd DE July 20, 2009, 2:17 pm

    Two years ago I read about plans to build an oil refinery in the Westfjords. It was on IR:

    http://www.icelandreview.com/icelandreview/search/news/Default.asp?ew_0_a_id=276970

    Apart from the fact, that this venture is very questionable for various reasons, a Russian participation would leave me all the more sceptical, because the Russians are not renowned for their resourceful and environmentally friendly attitude.

  • Kanadier July 20, 2009, 2:54 pm

    Dave Hambidge-

    If you consider 578,870 people to be a major European city, then yes Oslo is correct, however I consider that to be more a medium/small city, despite whatever historical significance and cultural importance it may have. London however has fifteen times as many people, which actually is a major city. Also maybe he meant EU cities. And if you consider five- or six-hundred thousand to be a significant city, then Glasgow is closer.

    Anyway, geographical proximity doesn’t always make the best of friends, so it doesn’t really mean much, especially when these countries aren’t actually even close, they’re just closer than other quite far away ones. I don’t even know why I’m talking about this like it matters :p.

  • Dave Hambidge July 20, 2009, 6:54 pm

    I live in a small town of 12,000 folk, so 500K plus is huge, IMHO.

    dave

  • Alexander E. July 20, 2009, 8:28 pm

    The article in barentsobsever is not correct. Russia hasn’t granted a loan. Yet.
    What Deputy Minister said is (in Russian but you can use Google translation)
    http://www1.minfin.ru/ru/press/speech/index.php?id4=7816

    He said that decision about the loan will be made by the end of July.
    By my opinion there are two reasons for loan – helping to protect “corporate interests” and/or getting opportunity to get into aluminum business in Iceland.

    Alda, the fact that “Personally I’m not aware of ANY Russian corporate interests in this country.” doesn’t mean they don’t exist 😉 It only reflects the fact Russians don’t need publicity – just money. So they do business here – without PR compaign.

    Another assumption that confusing for me – “The Arctic ice is melting and a new shipping route is opening up that would allow for much more efficient transport for the Russians than before. This in itself could have dramatic implications for this country, what with huge tankers potentially passing through our waters”

    What kind of shipping routes around Iceland are opening for Russia?
    What huge Russian tankers? To where?
    Russia sells most of it’s oil via pipes and very little by sea. It is oil from Middle East that comes in huge tankers 😉

    2 Ljósmynd DE
    ” a Russian participation would leave me all the more sceptical, because the Russians are not renowned for their resourceful and environmentally friendly attitude.”

    Iceland might require money to be printed on recycling paper only and with environmentally friendly watercolor (“aquarelle” in French) :-)))

  • David Goehrig July 20, 2009, 9:10 pm

    Taking financial help from the Russians? Beware. There is no such thing as a free lunch. It sounds like accepting funds from a maffioso/loanshark. There might be unstated repayment terms.
    I would like to add that Russia’s interest might have to do with seccuring a base for Arctic oil exploration.

  • Ljósmynd DE July 20, 2009, 9:32 pm

    According to IR in the article above, the planning of an oil refinery in the Westfjords has been initiated by an Icelandic and Russian cooperation, which is an explicit example of Russian business interests in Iceland and gives an answer to the question, where the tankers might go.

    Apart from its fragile environment there are many reasons not to choose the Westfjords as place for such a venture – like the danger of ice in winter etc.. And the job creation by such a refinery is nothing more than a myth – except for some local politicians, who get nice jobs, if they make the “right” decisions.

  • alda July 20, 2009, 10:50 pm

    David Raven – alas, Iceland needs loans from more people than just the Russians. Even USD 500 million wouldn’t get us very far. The Nordics, the IMF, even the Faroes and Poland (bless them) are lending us money.

    Alexander – The way I understood it, the loan has been approved, but the terms and conditions have not been finalized yet. Perhaps it hasn’t been approved, in which case I stand corrected. (As do most of the Icelandic mainstream media.)

    It only reflects the fact Russians don’t need publicity – just money. — I’m not talking about a PR machine — this is a small country and when there are foreign-owned companies here, or foreigners with substantial business interests, it is usually common knowledge. I don’t know of any Russian companies here – but I could be wrong, of course (that has happened once or twice in the past ;)) If you do, can you tell me what they are? I’m genuinely interested to know.

    What kind of shipping routes around Iceland are opening for Russia? What huge Russian tankers? To where? — basically what LDE said. As you’re probably aware there was heavy debate about that potential oil refinery on the West Fjords a couple of years ago. The talk then centered a lot on the fact that there would be Russian oil ships passing through that new shipping route and the West Fjords would be a convenient place for them to bring in the oil for refining.

    However, perhaps you have info that I don’t. Can you shed light on why Russia would consider Iceland a geo-strategically highly interesting partner, for example? And why the barentsobserver.com is speculating about a new role for Russia here in Iceland? I’d be genuinely interested in your thoughts.

  • Alexander E. July 21, 2009, 1:09 am

    Alda.
    I just read what Russian Deputy Minister said. You can enter the URL into Google translation – it’s not that bad. Part of translation
    “According to him, the Ministry of Finance today will pass to the government their assessment of the macroeconomic situation in Iceland, after which ” a political decision must be made, whether to grant a loan ” stressed the Deputy Minister.

    What I wanted to stress was – this is a LOAN. Not a gift. And most likely this loan is needed to save “investments” of some big guys (powerful enough to “arrange” half a billion loan) and leave us – small people to pay it back 🙁
    Almost same story with Polish “loan” – as far as I know. When panic started and Polanders started to flee Iceland – they couldn’t get their money out of the country. So Poland provided a loan – and these money just went back to Poland. But you – as well as me – were left with the loan… So don’t bless everyone who gives you money 😉 Usually there is a trap nearby.

    As to Russian big business in Iceland – sorry but one of the reasons I came to Iceland – to stay away from that big business. I don’t know details and I don’t want to know. I just hear from time to time the names of those who comes to Iceland – and believe me – these guys don’t come here just to swim in Blue Lagoon (it’s cheaper for them to fly Blue Lagoon to their homes). So are you really sure you really want to find out the details? 😉
    Another thing – many “serious” Russian companies don’t do business as Russian companies. They are hidden behind nicely sound “international” names. So it’s very likely you have been doing translation for them without knowing you deal with Russian money. There are several reasons for that – and avoiding a label “Russian company” is one of them. As David Goehrig said right here: ” Taking financial help from the Russians? Beware”
    …. of Russian bear? 🙂
    I don’t think that Russians are worse than two Björgólfurs.
    You said “his is a small country and when there are foreign-owned companies here, or foreigners with substantial business interests, it is usually common knowledge.” Yes it’s small but it looks like above mentioned father and son took the small country by surprise anyway…

    As to “Russian” tankers – look at http://www.scf-group.com/ – and you’ll find that this Russian company is one of the largest in the world but – most of its fleet goes under Liberian flag, operates in Middle East and is managed by Unikom Management Services (Cyprus) 🙂

    And here is Board of Directors
    Chairman of the Board of Directors
    Mr. Sergey Naryshkin – Chief of Staff of the Presidential Executive Office (aka President Administration)

    Members of the Board of Directors
    Mr. Andrey Kostin – Chairman and CEO of VTB Bank (aka bank of Foreign Trade)
    Mr. Yuriy Medvedev – Deputy Head, Federal Agency for Federal Property
    Mr. Aleksandr Misharin – Deputy Minister of Transport of the Russian Federation
    Mr. Gleb Nikitin – Deputy Head, Federal Agency for Federal Property
    Mr. Charles Ryan – Chief Country Officer and CEO, Deutsche Bank Group in Russia
    Mr. Aleksey Sokolov – Head of Department, Ministry for Economic Development
    Mrs. Elena Titova – Managing Director, First Deputy Chairman of the Management Board, Morgan Stanley Bank
    Mr. Aleksandr Tikhonov – Head of Department, Ministry of Transport of the Russian Federation
    Mr. Nikolay Tokarev – President, JSC Transneft (aka owner and operator of all Russian oil pipe lines)
    Mr. Sergey Frank – President and CEO of Sovcomflot

    Still want to find real details? 🙂 Then just call President Medvedev…
    But don’t mention me, please 🙂

    “Can you shed light on why Russia would consider Iceland a geo-strategically highly interesting partner, for example?”
    Sorry but I can’t as I don’t know who in Russia considers Iceland…in any way. It’s getting popular among “small” people who comes here to see the country (btw I found the Demon face at Hellnar). But geo-strategic partner? Never heard about such thing… I mean I’ve never heard about Russian geo-interests in Iceland from Russian sources. Looks like it exists (and was created by) in “western” minds only 🙂

    PS. if you have more questions – I live just 300 m from your house 😉

  • David Raven July 21, 2009, 11:51 am

    Alda -Call me cynical but if your government is still borrowing billions from around the world and they have the interest and repayments to make on all of these loans – there is no chance we will ever be repaid by you poor tax payers in Iceland.

    Here’s the situation. In my hometown of Daventry in the UK. Our local district council invested US$13 million into four of the Icelandic banks (despite the warnings – read: www. idaventry.com) and UK councils as a whole have invested US$1.5billion. The publicity being put out by the councillors – who all deny any responsibility for their investment strategy – is that we can expect as much as 80% of the money back. My question in view of all these comments is – where will the money come from?

    Its time for your government to stop borrowing and start persuading your neighbours to provide the support that is so badly needed and hopefully the British government is paying attention – fat chance! How much do we need a Russian port just north of Scotland?

  • Sigvaldi Eggertsson July 21, 2009, 12:05 pm

    David, the money being borrowed is to be used to build up reserves for the Central bank, it is not being spent so the Icelandic taxpayer will only have to pay the interest, not pay back the loan itself.
    The council money is presumably going to come from the assets of the Landsbanki in the UK, the UK government is entitled to half of what the sale of these assets are expected to bring in , I belive.

  • The Chosan One July 21, 2009, 4:17 pm

    They are not only our freinds, they are our financial backers the Russians.
    http://digg.com/business_finance/Landsbanki_fraud_and_the_Russian_Mafia

  • Mondrian July 21, 2009, 5:22 pm

    Yes, that piece of news definitely went under the radar in the UK and I’d be very interested to hear about the repayment terms.

  • Vikingisson July 22, 2009, 1:25 pm

    Why is a new Arctic route important for the Ruskies? Because it opens up a huge potential for shipping their far northern resources. They have been sending most of it by pipe because of the (former) ice problem. There is a lot more up there they could bring down if they had a way other than pipe that doesn’t yet exist in many areas and useless for things other than oil. Sure, they’d love to ship oil and other things over the top. The same arguments are happening over here over the western routes via the Canadian arctic.

    Remember Afghanistan before 9/11? The Russians wanted control so they could run a pipeline through. It wasn’t and still isn’t about political ideology. The pipeline didn’t happen of course but guess what is getting built now that the Talibaners are less in control…. It is always about the money and so will any Russian interest in Iceland. So don’t get too desperate or you’ll trade one financial mess for an even bigger one later on.

  • Katrina July 30, 2009, 1:36 pm

    “suddenly Russia wanted to be our new best friend”
    well actually Russia isn’t the one who wants to be friend, I think it is pretty clear that Iceland is looking for a loan. And it is not surprise that Iceland is asking Russia for a loan, as Russia still has reserves, is giving loans to USA, Cuba etc. And honestly I don’t think that Russia will give loan to Iceland. but we will find out it soon.