Russia gives credit to Iceland

This news is now about a year old, and should have been included here earlier. But better late than never!

The Russian government has decided to give Iceland a 500 million USD credit in crisis aid. The Russian government, itself struggling with major economic hardships, has granted Iceland a 500 million USD loan, Deputy Finance Minister Dmitry Pankin yesterday told newspaper Vedomosti. That message comes less than a month after an official Icelandic delegation visited Moscow.

Conditions for the credit remain unclear. A press spokesman for the Icelandic government says however to the newspaper that negotiations are still ongoing.

Iceland quickly approached Russian authorities after the collapse of its economy last year. Negotiations with the Russian have been going on for months. Finance Minister Kudrin quickly admitted however that the bid for a 4 billion USD loan, first requested by Iceland, would be too much for Russia.

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.

The crisis-ridden Icelandic economy is from before supported by a loan from the IMF. All the Nordic countries have also contributed substantial sums to help Iceland overcome it historic economic downturn.

The economic crisis is about to significantly alter the political adherence of Iceland. EU membership is in the pipeline and analysts have also speculated about a possible new role of Russia on the island.

That speculation was spurred by Icelandic President Olafur Ragnar Grimsson during a dinner with foreign diplomats late last year. Mr. Grimsson then shocked the diplomats saying that Russia could be invited to take use of the strategically important Keflavik airbase. As BarentsObserver reported, the president also said that his country needs “new friends”.