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The warm embrace of the Chinese

Imagine our surprise this week up here in lil’ old Iceland when — without prior warning — we were suddenly confronted with a rather large convoy of imposing black vehicles , driving through our streets and stopping traffic, replete with police vehicles and flashing blue lights. It was like the president of the freaking United States had paid us an unexpected visit and perhaps not unusual that people stood by like plebs on the sidelines with their mouths hanging open, wondering whether at any moment old Clint Eastwood would jump out of hiding and yell CUT!!

But no, it was only the Chinese — here to do a currency swap deal with the Icelanders.

Yes indeed, a delegation of high-ranking Chinese officials appeared on our doorstep this week completely without warning — at least the commoners like YT and her ilk had no idea about it until the streets were suddenly crawling with cops. Before they left they had signed a currency swap agreement with the Icelanders to the tune of 1.5 billion Chinese yuan, or ISK 60 billion — with no strings attached.

[Yeah, right.]

According to Icelandic authorities, the deal was meant only to be a “declaration of trust” and “a positive step in relations between the two countries.” To demonstrate how the Chinese feel we’re doing such a great job of putting our house in order up here. A proverbial little pat on the head.

Hm. Which is why I can’t for the life of me figure out why the Chinese officials also signed a declaration of intent with the National Power Company to participate in future tenders to build power plants in Iceland.

Or why everyone is talking about the Chinese interest in the new shipping route opening up north of the country with the melting of the polar ice cap, which just happens to pass through Icelandic territory.

You know, sometimes I can’t decide whether Icelandic officials are stupid, or whether they just think we, the proletariat, are stupid.

And I also can’t figure out why so many Icelanders are running screaming from the European Union and straight into the warm embrace of the Chinese. But maybe that’s just because I don’t understand the Big Issues at hand.



Comments on this entry are closed.

  • Mike June 11, 2010, 6:53 pm

    There’s talk that the Chinese want access to Icelandic expertise in drilling ultra-deep, ultra-hot geothermal power. China is tectonically active with some volcanoes and has considerable untapped geothermal reserves in the Western provinces and especially in Tibet which is littered with hot springs and geysers. The Chinese government has recently named Xianyang in Shaanxi as ‘geothermal city’, replacing coal-based power (which is basically killing people by the hundreds of thousand) with clean energy.

    Politically, developing Tibet’s natural resources such as hydropower, minerals, gas, oil and now heat are key parts of the Chinese strategy for gradually absorbing Tibet into greater China.

    If this article is true, there is already a Chinese/Icelandic collaboration in the field:




  • idunn June 11, 2010, 8:00 pm

    The Chinese have been making a lot of deals internationally, with the intent of securing raw resources for their growing economy. Many of these have occurred in Africa where the Chinese show up with an open checkbook, some government palms are washed, and the people begin to notice mines, etc. popping up and their resources going elsewhere.

    You are surely close to the mark in mentioning electricity. Their interest will be in whatever relatively raw resources Iceland might provide. If you had forests, it would be timber as well. Their interest in manufactured or value-added goods will likely be nil; this is the stuff they would rather make and sell to someone else.

    One cannot entirely fault the Chinese in such an enterprise, it is a path previously blazed by Great Britain, the USA, and other imperial powers. And in its more benign aspects simply a matter of business, of fair trade. But one might want to keep a close eye on anyone that has few qualms in marketing tainted children toys and toothpaste. For that matter, anyone from anywhere thinking Iceland will be the perfect place for their respective projects. The environment or welfare of local inhabitants is not often high on their list of priorities, something along the lines of only if they must.

    It is up to Iceland and her citizens to see that they must.

  • snowball June 11, 2010, 9:52 pm

    the chinese are not stupid, they give iceland a hand when no one else does, so that niceland might think they found a new ally :-). however, dont forget that china is a rising superpower and the day will come where the helping hand turns into the iron fist.

    one thing is for sure here in iceland, you have no idea what you are dealing with. the chinese agenda for iceland is of same spirit as it was for the african precious metal rich countries. nota bene, the chinese are protecting their properties in africa with armed chinese “security staff”. no way that they hand over (read re-nationalize) an oil field or copper mine to some rebel prince…they shoot.
    more critical is the chinese idea to go with ships through the arctic and establish some kind of super cargo hub here in iceland. free trade zone sino-islandia. if the chinese would only be interested in free trade with eu and us, a cargo hub in the northern atlantic is not necessary. however, if they are interested in controlling the flow of goods or even operating a small harbor (which can be switched into naval base overnight) in the back garden of nato it all makes sense. again, these are all the ingredients for confrontation. and no one here in iceland seems to get it.

    regarding the cooperation in geothermal, guess how this goes?! reminds me on a story playing in germany in the 1980s when numerous chinese engineers (inivited by the west german government) worked in building administrations and publicly owned utility companies. basically, the chinese were standing day and night behind xerox machines and making copies of all available drafts and plans of hydro power stations, canals, bridges, water locks and high dams. this was actually tolerated and inofficially supported by the building administrations and utilities -it was considered some sort of development aid- because the chinese engineers had the task from their bosses to collect as much material as possible and bring it with them back home.
    knowing my icelanders, i am not sure if they are so keen on a free technology transfer 🙂

  • Michael Sullivan June 11, 2010, 10:28 pm

    Ah, yes, clearly you do not see the “big picture” 😉

    This is simply friendship between two countries.

    On the other hand, Iceland would make a great airbase, too. Wasn’t England referred to as “airstrip #1” by the Americans?

  • Kris June 11, 2010, 11:29 pm

    Let’s apply the smell test: sniff sniff. My, that sure is stinky!
    idunn has it right. The big dogs have been running around the planet purchasing resources. Iceland is about to go up for sale and they want to be VIP customers! Capiche?
    “Never make a politician (aaa-aaah) grant you a favour;
    They will always want (aaa-aaah) to control you forever, eh!
    (forever, forever)”
    Bob Marley

  • D_Boone June 11, 2010, 11:41 pm

    No problem with the Chinese wanting to do business with Iceland. Its up to both countries *governments* to make sure its to their mutual benefit and not just to the benefit of one country plus a bunch of “quick buck” cronies in the other. Given the recent history in Iceland I would be surprised if its citizens don’t have their “snake oil sales pitch” antenna set now at a sensitive setting. What they need to do is ensure the rules are both present and adhered to.

    In the normal course of things it would be very surprising if some mutual benefit for both countries could not be obtained.

  • sylvia hikins June 11, 2010, 11:42 pm

    I’ve had two quite long trips to China in the past couple of years. I am not a China basher and the developments they are making in their infrastructure is awesome. But, in spite of their one child per family policy, they have the biggest population of any nation on earth and they are after any raw materials they can get their hands on. Thanks to global capitalism, they have vast sums of surplus money and are buying up anything that may be of use to them in the short or long term future – eg: their present investments in Africa. Wise words then from idunn. Iceland should choose it’s business partnerships carefully and keep raw materials under Icelandic control. You will need your natural resources long after the kreppa has blown over.
    sylvia from viking wirral

  • Easy June 12, 2010, 2:38 am

    “You know, sometimes I can’t decide whether Icelandic officials are stupid, or whether they just think we, the proletariat, are stupid.”
    Well, I think is both options.

    Now lets clarify this “currency swap” it has been made clear by the chinese that it is only to buy chinese goods, we can not send them a bunch of krona and get yuans, we can only buy their stuff with this swap. So spect alot of chinese products, I have to admit in a way it´s good because now we now that when whatever is left goes down the drain, at least we will be able to buy rice.

  • Øystein June 12, 2010, 6:53 am

    All the Nordics countries cooporate with China these days, and it is on the agenda on the Expo 2010 – http://www.nordicenergy.net/section.cfm?id=3-0&path=142,201

  • goupil June 12, 2010, 7:16 am

    I suppose they carry on with their investment portfolio diversification and buy technology know how. All to the good if there ain’t any other string attached. Beside Iceland is a bit cash strapped and can’t look too hard in the proverbial horse mouth.
    Let’s hope for the best.

  • Joerg June 12, 2010, 8:37 am

    I get the ompression that the concept of independence is pretty biased in parts of the Iceland population. The EU is allegedly preying on Iceland’s natural ressources but no such worries as far as international aluminium companies or Chinese interests are concerned?

    Nothing shows more clearly, that the EU bashing is mainly a spin by special interest groups. As long as the dealings with foreign parties involve clandestine, intransparent behind-closed-door talks and as long as it is not evidently about fishery, those people don’t seem to mind. And I wouldn’t be surprised, if there were nice perks available.

    In general, there seems nothing wrong about doing business with China but there should be transparency and the ressources should remain under Icelandic control.

  • Sebastian June 12, 2010, 10:08 am

    1.5 billion Chinese yuan

    3.5 that is.

    Iceland can now pay for stuff from China with yuan instead of dollars.

  • TMCD June 12, 2010, 10:10 am

    The Golden Rule:
    He who hands out the gold…makes the rules.
    For …he who eats my bread…does my bidding.

    Snowball has it correct.
    With that said, may I add…that the Chineses do not leave w/o a fight. They do not take kindly to peaceful protest…of any sorts.


  • kevin oconnor,waterford ireland June 12, 2010, 3:02 pm

    1.3 billion people help out 300k Icelanders everybody say aaahhhwww ha ha, look on the bright side at least you will end up speaking a language which easier to comprehend than Icelandic 🙂

  • Cactus Zonie June 12, 2010, 4:48 pm

    operating a small harbor (which can be switched into naval base overnight)

    Very good , Snowball. It always amazes me how many people fail to see what an extraordinary strategic location Iceland is. You want this Island on your team. When the *hit hits the fan there will be a battle for this place , trust me.

  • Rik Hardy June 13, 2010, 11:03 am

    Buy rice with what, Easy – melted glacier?
    I, too, am wondering just how high a percentage of Icelanders have developed terminal stupidity.
    Our country, like the USA, seems to be entirely unaware of the fact that somebody, somewhere, actually has to PRODUCE something, if they wish to do business with other countries.
    All our current woes stem from expecting to survive without actually trading in anything more substantial than empty words.
    As for China, that country’s business philosophy became clear to a friend of mine thirty years ago, when he attended an international conference at a time when China was beginning to open up a little.
    The mantra he heard from all their representatives on that occasion was, and I quote: “We no buy; only sell.” – and you have to imagine that being said with a very agressive tone.
    Like Sylvia, I’m no China basher – I’ve also seen the country – but that doesn’t mean that one walks around on the top of Eyjafjallajökull with one’s eyes closed.
    We really must move on from the “Let’s run away and hope for the best” philosophy. We have our mental faculties for a reason, and I, for one, am not about to let our representatives forget their own mantra of “transparency and accountability”.

  • kevin oconnor,waterford ireland June 13, 2010, 1:39 pm

    Yes Rik Hardy heres a story about them giving Tibetans a hard time, might pay for Iceland to develop a first strike nuclear delivery system they might need it one day.


  • Chris Cook June 13, 2010, 1:46 pm

    We have lived in a bipolar world since 2007, when IMHO China quietly put an end to US hegemony by exercising an economic veto in respect of their interests in energy security in the Middle East.

    The Chinese are not interested in military expansionism – they built the Wall to keep the barbarians OUT, remember? They prefer to exercise economic power, and are quite content for US 19 year olds to die protecting Chinese economic interests.

    My advice to Iceland is that you should never EVER allow ownership of Icelandic productive assets to go abroad, and where you have done so you should buy it back, with Chinese money. Nor should you borrow at compound interest from the Chinese to develop them.

    There is another route to finance and development – a partnership route.

    Look at aluminium.

    Step One – invite the Chinese to invest directly in future production through the simple expedient of creating Units redeemable in payment for aluminium supplied.

    Step Two – use the sale proceeds from unitisation to get the debt/interest monkey off your shoulder;.

    Step Three – renegotiate your contracts with Alcan/ whoever, so that they become an operating partner sharing production – which aligns their interests with yours and minimises their capital requirement.

    Step Four – enter into a supply partnership with (say) Jamaica, so that they get a proportional share of the aluminium created from their bauxite and your energy.

    Win/Win/Win – partnership is not Rocket Science.

  • kevin oconnor,waterford ireland June 14, 2010, 6:27 am

    Please stop killing whales

  • Rik Hardy June 14, 2010, 10:57 pm

    I said I wasn’t a China basher, Kevin; I didn’t say their politicians smell like roses…
    Chris’s plan would probably be rejected by the Chinese, because it expects them to put their faith in redeemable units. They have wanted hard cash for the last thirty years, and they are tough negotiators – but perhaps that has changed with recent world developments…

  • neil June 15, 2010, 7:24 am

    I think that this kind of deal could be a clever move on the part of the government, it could ultimately strengthen Icelands hand in its accession talks with the EU. And im not sure there is that much to worry about longer term, I cannot believe for one minute that Icelanders will like the idea of imported chinese labour, naval bases, ports and power plants. Icelands future is part of Europe.

  • Mike June 15, 2010, 10:21 pm

    An interesting follow-up.

    The Chinese government has just signed a huge commercial deal with another bankrupt European country – Greece, literally hours after the country’s credit status was downgraded to junk.


    So perhaps there’s a bigger strategy in play here.

  • James June 17, 2010, 1:02 pm

    Call me cynical on this Day of Independence but it looks like the US have caught wind of this and have retaliated with a message from Hillary Clinton: http://mbl.is/mm/frettir/erlent/2010/06/16/clinton_sendir_islendingum_kvedju/

    It kind of sounds like, “Iceland, what’s the deal with China huh? We’re like, REALLY old friends”

  • alda June 17, 2010, 1:12 pm

    Heheheh. I like your interpretation, James — but then, I’m a cynic myself. 😉

  • ed June 17, 2010, 1:29 pm

    Notice Hillary ended with “all the BEST for the years that come”. Could this be diplo-code speak demonstrating US support for Jon Gnarr?

  • Hordur Valsson June 20, 2010, 9:25 am

    Why SHOULDN’T we be in bed with China?
    Is there really any other alternative?
    We can always crawl on our knees to the EU and beg for what ever they see us fit or we can keep our dignity and be a friend with the next world empire.
    The situation we are in with Holland and the UK will enslave us if nothing changes and our very so proud national soul will just become a tiny number in some office in Brusselles.
    I say let China help us pay our debts with those two and everybody wins.

  • Arjan July 3, 2010, 6:11 am

    The Chinese are evil that we know – Tibet, Darfur etc. What seems you don’t realize is EU is lot more evil.

    They are remote controlled by Saudis & Isalmists with their petro billions to create a so called Islamist multicultural Europe. Given Saudi Wahhabi disdain for women, minorities and non-Muslims besides funding Jihadist we don’t want a nightmarish Europe EU that EU Mandarins envision.

    I guess Iceland’s best bet given its strategic location might be Americans. They might be loud & boisterous but are noble at heart and share similar value of freedom, equality and justice.

  • Hordur Valsson July 3, 2010, 6:53 pm

    The Americans told us they would have a military base in Iceland for quite some time, as far as I can remember. Once we’d signed that stupid document of 16 nations out of around 200, that supported the invasion into Iraq II, they were quick to evacuate.
    Personally I like some things american, such as music and films, but as for politics, there are only two things that drive America and that is money and more money. I don’t trust them one bit after that George Bush II era. Not sure the Chinese are any better, but atleast they give us a hand when nobody else is doing it, in times of BIG trouble.

    One thing that could happen is that the EU nations keep taking us for granted until they realize that China is already in their backdoor via Icelandic territory.

    I’ve heard that China wants to practice on Iceland how to deal with European regulations, as our system is alot simpler than EU’s bulks of beaurocracy and then they will expands out from us into Europe.

    Not to mention that the future of the Euro is uncertain. This whole situation is uncertain, all I know is that it isn’t one bit Icelandic to go on our knees and say “Please Holland and UK, may I ask for more mistreatment of your behalf?” Gordon Brown, the last prime minister of the UK put Iceland on the list of terrorist nations to freeze some assets.
    And if we join the EU, like some want back home, we’ll just be a little folder in a box somewhere in the trainee department in Brusselx, no way Germany, France, Spain, UK and other large countries are going to make deals with Icelandic interests up front. We’re only 300.000, no way the US are going to have our best interests in mind.

    Therefore, we have to take help from where it’s available right now.