Can This Small Nation Become the EU's Biggest Economic Asset and a Draw for Norway?

Iceland, a nation of just over 380,000 inhabitants, is at a crossroads this weekend as it decides whether to restart negotiations for European Union membership. While a small country, its potential accession is viewed by Brussels as a move with considerable symbolic and strategic implications.

The question of the EU's relationship with Iceland is not new. The nation's history is intertwined with asserting control over its territorial waters, a struggle symbolized today by the Odin, a former Icelandic coast guard vessel docked in Reykjavík harbor. This ship played a role in the "cod wars" with the United Kingdom, where Iceland gradually expanded its fishing zones. Decades later, the issue of who governs Icelandic waters remains pertinent.

According to Austrian publication Kurier, fishing rights were the primary barrier during Iceland's first attempt at EU accession following the 2008 financial crisis, which ultimately led to the freezing of negotiations. This time, however, Brussels is signaling a willingness to consider a unique arrangement for the fisheries sector. Political scientist Maximilian Conrad from the University of Iceland notes this approach is unusual, as the European Commission rarely announces compromises on fisheries policy early in an enlargement process.

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It is rare that the European Commission announces a compromise in fisheries policy at the beginning of an enlargement process.

Conrad suggests this flexibility is partly due to Iceland's geographical position in the crucial North Atlantic. Beyond economic considerations, the geostrategic context is increasingly important. Magnús Árni Magnússon, president of the European Movement of Iceland, highlights the growing significance of the Arctic region. Russia's Northern Fleet is based in Severomorsk, and passage to the Atlantic requires navigating the GIUK gap – a maritime corridor between Greenland, Iceland, and the United Kingdom. Iceland sits centrally within this corridor, offering a strategic advantage for monitoring Russian naval activity.

The melting Arctic ice further amplifies Iceland's importance by opening new shipping routes, increasing traffic in the North Atlantic. Economically, Iceland would be a valuable EU member. It ranks among Europe's wealthiest nations by GDP per capita and would enter the EU budget as a net contributor. Its economy is export-oriented, traditionally relying on tourism, fishing, and aluminum production, but it is also seeing growth in pharmaceuticals, aquaculture, and technology.

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Iceland is located exactly in the middle of that corridor, which gives it an extremely advantageous strategic position from the perspective of monitoring Russian fleet activity in the North Atlantic.