Small states in ‘Big Power’ games

Sallie Anderson

The world is a rough location, and for small countries all the more so. Maybe there is no much better location to observe this than in Iceland.

Twenty years ago the most dominant foreign impact in Iceland was the United States, as it had actually been throughout the cold war.

  • Chinese financial investment made up practically 6 percent of Iceland’s typical GDP over the past 5 years.

Nowadays it is China.

The Chinese are all over the island. In 2015 Iceland ended up being the first nation in Europe to sign a trade contract with China, generally to enhance the export of Icelandic fish.

With loans from the Asian Advancement Bank, Icelandic business are assisting to establish a geothermal market in China. Because 2010 there have actually been numerous currency swaps in between bothcountries


In 2018 both opened an Arctic Science Observatory in the north of the island. In the exact same year China welcomed Iceland to join its Belt and Roadway effort.

There is just one case in which Iceland is understood to have stated no.

That was in 2011, when a Chinese property magnate wished to purchase a big plot of land in the east of the island to construct a golf course. The location was close to a harbour. Fearing it might be developed into a military port or airport one day, Reykjavik declined.

Influenced by his nation’s current geopolitical somersaults Baldur Thorhallsson, an Icelandic political researcher, composed a book calledSmall States and Shelter Theory; Iceland’s External Affairs


It’s a case-study about a small nation that is permanently trying to find security however never ever discovers it – temporarily, a minimum of. Each time when geopolitical shifts take place, the nation needs to start all over once again.

After 5 centuries of foreign supremacy, Iceland acquired self-reliance from Denmark in the 1940 s. It instantly started to look for shelter once again, and discovered it with the United States.

It likewise supported close ties with Denmark, Norway, Sweden and Finland. Throughout the Cold War the international system used small countries some degree of security versus the supremacy of bigcountries


For years this worked well. Long enough, in any case, to provide Icelanders the impression they were safe.

Then, in 1989, the Berlin Wall boiled down. Beyond the concept that industrialism had actually thrived which the remainder of the world would now end up being democratic, lots of Icelanders at first had no idea what the repercussions of this would be.

That all of a sudden altered in 2006, when the United States revealed the closure of the first military base in Europe – the one in Iceland. The island didn’t even have a defence budget.

From one day to the next, Icelanders felt susceptible once again and began trying to find shelter as soon asmore Small countries, argues Thorhallsson, are more susceptible than big ones – politically, financially and militarily.

They are not just most likely to be struck by attacks and crises however, more most importantly possibly, they are completely by themselves when it concerns tidying up later on.

Banking on Iceland

This ended up being clear when, in 2008, the financial crisis hit. Iceland, with its extra-large banking sector and lax oversight, was greatly impacted. The majority of business and banks decreased, bankrupting the state in the procedure.

In the old reflex, Reykjavik asked the United States for aid– in vain.

It then relied on Nordic neighbours and the European Open Market Association (EFTA), of which is it a member, for help. Absolutely nothing required those countries– all of whom have actually discovered shelter inside or in really close relationship with the EU – to supply for financial uniformity.

Then, Iceland obtained EUmembership


This didn’t work out either. Iceland declined to subject its fisheries to EU guidelines. Brussels sided with British and dutch depositors in Icesave, an Icelandic bank that had actually gone insolvent, supporting their need for settlement by Iceland.

Reykjavik took this really terribly.

The message of all this was unavoidable: small countries in a geopolitically moving world are on their own. This is the rate of sovereignty – as the British are finding, too.

Iceland has difficulty relying on the EU given that the Icesave affair. It is a member of Nato and EFTA. With its Nordic neighbours it patrols airspace, arranges student exchanges and deals with cybersecurity.

It is connecting to the UK, the other only wolf on the edge of Europe, with whom it has actually simply formed a defence alliance. In some way little Iceland, with simply 365,000 occupants, looks more interested in this than the UK.

Throughout the financial crisis, the first countries offering loans to Iceland were Russia and China.

A great option for a nation that puts itself in the Western camp. Disbursal of an IMF loan was at first obstructed by the UK and the Netherlands, who required settlement for Icesave depositorsfirst


Svein Harald Øygard, a Norwegian who administered the Icelandic Central Bank in that duration, states that although the Icelanders had actually produced the mess themselves, the Dutch and british behaved “like a pack of wolves”.

It was at this phase that China entered into the image. Gradually it began to fill deep space the EU left.

After the preliminary trade contract there have actually been numerous Chinese efforts that the Icelandic federal government has actually engaged in: tourist jobs, green energy, polar shipping and clinical research study.

Chinese financial investment made up practically 6 percent of Iceland’s typical GDP over the past 5 years.

Reykjavik even assisted China to get a seat in the Arctic Council, as an observer. With Russia quickly stepping up its interest in the arctic, the Chinese relocation raised eyebrows all over the area. China released an Arctic policy in 2019.

Is Iceland duplicating the exact same error once again: over-reliance on one big ally? Resenting this Chinese participation, the United States has actually all of a sudden revealed a restored interest in Iceland.

Secretary of state Mike Pompeo pertained to Reykjavik in 2015, thanking the federal government for “rejecting” China’s deal to sign up with Belt and Roadway. Iceland has actually not turned down that deal– it is under factor to consider.

“Iceland won’t be neglected anymore,” Pompeo stated. In some way this does not sound like shelter. It sounds more like fantastic power competition, in which small states can be squashed– specifically when they’re all by themselves.

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