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Originally posted on October 7, 2008 on Alda Sigmundsdottir’sThe Iceland Weather Report.

Our Prime Minister is holding a press conference as I type this, has just done so in Icelandic and is at the moment speaking to the foreign journalists that are here in Niceland monitoring the situation.

Things have happened swiftly this morning, as in previous days. The legislation introduced in parliament yesterday was passed last night and this morning the state intervened in the operations of Landsbanki. What that means in practice I cannot tell but supposedly the bank is operating normally here in Iceland, as are the other banks.

[However, mbl.is has reports right now that people went down to the bank to withdraw their savings and were told to return in a few days - whatever that means. Perhaps it refers to the trading in funds as I outlined in a previous post … that trading is still suspended.]

The biggest bombshell this morning, though, in my view, and the one likely to have the most political implications, is that Russia has come forward with an offer of a loan to the Icelandic state in the amount of EUR 4 billion. Our government has accepted and will be sending people to Moscow shortly to negotiate the terms.

This is hugely significant, particularly as the nations that Iceland has heretofore considered its ‘friends’ have effectively turned their backs on us in these very difficult circumstances. As the Prime Minister ended the English part of the press conference just now, a journalist asked about the loan offered by Russia and he saw reason to return to explain Iceland’s position. Seems that over the past few months the government has appealed to many of its ‘friends’ for currency swap agreements but they have not always been forthcoming. The PM refused to mention any specific countries, but presumably this is a direct reference to the United States Treasury, which about a month ago very significantly left Iceland out of a substantial currency swap agreement with the Nordic states, something that has never happened before. In previous agreements, Iceland has always been part of the Nordic package. So in the words of our Prime Minister, and I quote:

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

Now, far be it from me to look a gift horse in the mouth, but since the extension of this loan has been approved by Mr Putin himself, something tells me the Russians are sidling up to us for a very specific reason. See, Iceland has been a strategic point for the two superpowers for years. During the cold war, this country was a major base for the US [as part of NATO] in its efforts to keep close tabs on Russia, as demonstrated by the US military base that was operated here until - oh - two years ago, when the US government unilaterally decided to pull its troops out of Iceland, as the Russians were no longer considered a threat.

Well, as most of us know, this situation has changed drastically in the last few months. A new cold war may be brewing, and - oops! - the US has relinquished its strategic base in Iceland.

To summarize: a] The US pissed off Icelandic authorities two years ago, when they unilaterally pulled their military out of Iceland, with the accompanying job losses and whatnot.* b] The US pissed off Iceland a few weeks ago when they purposely left them out of a currency swap agreement. c] Iceland has gone looking for new friends. d] Russia is Iceland’s new best friend.

Make of it what you will.

THE STORM HAS BLOWN OVER
And right now we have sunny skies, although the wind is still blowing. [Don’t you just love a good metaphor?] It’s warming up, too, currently 10°C [50F] and the sun came up at 7.55, will go down at 6.34.

* I think around 600 Icelanders lost their jobs in one fell swoop - but generally, after the initial shock, it was agreed that this was a very good thing for the Icelandic nation. The state bought all of the military’s assets and the NATO base has since been turned into a university.