Background: Settled by Norwegian and Celtic (Scottish and Irish) immigrants during the late 9th and 10th centuries A.D., Iceland boasts the world’s oldest functioning legislative assembly, the Althing, established in 930. Independent for over 300 years, Iceland was subsequently ruled by Norway and Denmark. Fallout from the Askja volcano of 1875 devastated the Icelandic economy and caused widespread famine. Over the next quarter century, 20% of the island’s population emigrated, mostly to Canada and the US. Limited home rule from Denmark was granted in 1874 and complete independence attained in 1944. Literacy, longevity, income, and social cohesion are first-rate by world standards.
Government type: constitutional republic
Currency: 1 Icelandic krona (IKr) = 100 aurar
Geography of Iceland
Location: Northern Europe, island between the Greenland Sea and the North Atlantic Ocean, northwest of the UK
Geographic coordinates: 65 00 N, 18 00 W
total: 103,000 sq. km
land: 100,250 sq. km
water: 2,750 sq. km
Land boundaries: 0 km
Coastline: 4,988 km
continental shelf: 200 nm or to the edge of the continental margin
exclusive economic zone: 200 nm
territorial sea: 12 nm
Climate: temperate; moderated by North Atlantic Current; mild, windy winters; damp, cool summers
Terrain: mostly plateau interspersed with mountain peaks, icefields; coast deeply indented by bays and fiords
lowest point: Atlantic Ocean 0 m
highest point: Hvannadalshnukur 2,119 m
Natural resources: fish, hydropower, geothermal power, diatomite
arable land: 0%
permanent crops: 0%
permanent pastures: 23%
forests and woodland: 1%
other: 76% (1993 est.)
Natural hazards: earthquakes and volcanic activity
Environment – current issues: water pollution from fertilizer runoff; inadequate wastewater treatment
Environment – international agreements:
party to: Air Pollution, Biodiversity, Climate Change, Desertification, Endangered Species, Environmental Modification, Hazardous Wastes, Law of the Sea, Marine Dumping, Nuclear Test Ban, Ozone Layer Protection, Ship Pollution, Wetlands
signed, but not ratified: Air Pollution-Persistent Organic Pollutants, Marine Life Conservation
Geography – note: strategic location between Greenland and Europe; westernmost European country; more land covered by glaciers than in all of continental Europe
People of Iceland
Most Icelanders are descendants of Norwegian settlers and Celts from the British Isles, and the population is remarkably homogeneous. According to Icelandic Government statistics, 93% of the nation’s inhabitants live in urban areas (localities with populations greater then 200) and about 60% live in Reykjavik metropolitan area. Of the Nordic languages, the Icelandic language is closest to the Old Norse language and has remained relatively unchanged since the 12th century.
About 91% of the population belongs to the state church, the Evangelical Lutheran Church, or other Lutheran Churches. However, Iceland has complete religious liberty, and about 20 other religious congregations are present.
Most Icelandic surnames are based on patronymy, or the adoption of the father’s first given name. For example, Magnus and Anna, children of a man named Petur, would hold the surname Petursson and Petursdottir, respectively. Magnus’ children, in turn, would inherit the surname Magnusson, while Anna’s children would claim their father’s first given name as their surname. Women normally maintain their original surnames after marriage. This system of surnames is required by law, except for the descendants of those who had acquired family names before 1913. Most Icelanders, while reserved by nature, rarely call each other by their surnames, and even phone directories are based on first names. Because of its small size and relative homogeneity, Iceland holds all the characteristics of a very close-knit society.
Population: 296,737 (July 2005 est.)
0-14 years: 23.18%
15-64 years: 65.01%
65 years and over: 11.81%
Population growth rate: 0.91%
Birth rate: 14.62 births/1,000 population
Death rate: 6.89 deaths/1,000 population
Net migration rate: -2.28 migrant(s)/1,000 population
Infant mortality rate: 3.56 deaths/1,000 live births
Life expectancy at birth:
total population: 79.52 years
male: 77.31 years
female: 81.92 years
Total fertility rate: 2.01 children born/woman
Ethnic groups: homogeneous mixture of descendants of Norwegians and Celts
Religions: Evangelical Lutheran 91%, other Protestant and Roman Catholic, none (1997)
definition: age 15 and over can read and write
total population: 99.9% (1997 est.)
History of Iceland
Iceland was settled in the late 9th and early 10th centuries, principally by people of Norse origin. In 930 A.D., the ruling chiefs established a republican constitution and an assembly called the Althingi–the oldest parliament in the world. Iceland remained independent until 1262, when it entered into a treaty establishing a union with the Norwegian monarchy. Iceland passed to Denmark in the late 14th century when Norway and Denmark were united under the Danish crown.
In the early 19th century, national consciousness revived in Iceland. The Althingi had been abolished in 1800 but was reestablished in 1843 as a consultative assembly. In 1874, Denmark granted Iceland home rule, which again was extended in 1904. The constitution, written in 1874, was revised in 1903, and a minister for Icelandic affairs, residing in Reykjavik, was made responsible to the Althingi. The Act of Union, a 1918 agreement with Denmark, recognized Iceland as a fully sovereign state united with Denmark under a common king. Iceland established its own flag, but Denmark continued to represent Icelandic foreign affairs and defense interests.
German occupation of Denmark in 1940 severed communications between Iceland and Denmark. Consequently, Iceland moved immediately to assume control over its own territorial waters and foreign affairs. In May 1940, British military forces occupied Iceland. In July 1941, responsibility for Iceland’s defense passed to the United States. Following a plebiscite, Iceland formally became an independent republic on June 17, 1944.
In October 1946, the Icelandic and U.S. Governments agreed to terminate U.S. responsibility for the defense of Iceland, but the United States retained certain rights at Keflavik. Iceland became a charter member of the North Atlantic Treaty Organization (NATO) in 1949. After the outbreak of hostilities in Korea in 1950, and pursuant to the request of NATO military authorities, the United States and Iceland agreed that the United States should again be responsible for Iceland’s defense. A bilateral defense agreement signed on May 5, 1951, is the authority for U.S. military presence in Iceland. Iceland is the only NATO country with no standing military of its own.
Marine products account for the majority of Iceland’s exports of goods. Other important exports include aluminum, ferro-silicon alloys, equipment and electronic machinery for fishing and fish processing, pharmaceuticals, and woolen goods. Information technology and related services is an important growth area. Foreign trade plays an important role in the Icelandic economy. Exports account for about one-fourth of GDP and imports for one-third. Most of Iceland’s exports go to the EU and EFTA countries, the United States, and Japan. The United States is Iceland’s largest bilateral investment partner and largest partner in services trade.
Iceland’s relatively liberal trading policy was strengthened by accession to the European Economic Area in 1994 and by the Uruguay Round agreement, which also brought significantly improved market access for Iceland’s exports, particularly seafood products. However, the agricultural sector remains heavily subsidized and protected.
Iceland’s economy is prone to inflation but remains rather broad-based and highly export-driven. The 1970s oil shocks hit Iceland hard. Inflation rose to 43% in 1974 and 59% in 1980, falling to 15% in 1987 but rising to 30% in 1988. Since 1990, due to economic reforms and deregulation, inflation has dramatically fallen, averaging only 4.85% from 1990-2000. Due to several years of strong economic growth, Iceland experienced the best economic period in its history in the 1990s. However, the economy fell into recession in late 2001 and inflation began to escalate. In March 2001, the Central Bank adopted an inflation target exchange rate policy instead of an index rate policy with the aim of managing the value of the Icelandic Krona to keep inflation below a certain level. In addition, the government urged municipalities, labor unions and private parties to unite in keeping inflation down. Unemployment more than doubled to 2.6%, and inflation that spiked above 9% threatened to give labor unions leverage to abrogate national wage agreements. The government took monetary and fiscal measures that brought inflation down close to the current target rate of 3%. Inflation is expected to remain moderate in 2002, but with slightly negative GDP growth. The government expects a return to positive growth in 2003.
Iceland has few proven mineral resources, although deposits of diatomite (skeletal algae) are mined. Abundant hydroelectric and geothermal power sources allow about 90% of the population to enjoy heating from these natural resources. The Burfell hydroelectric project is the largest single station with capacity of 240 mw. The other major hydroelectric stations are at Hrauneyjarfoss (210 mw) and Sigalda (150 mw). Iceland is exploring the feasibility of exporting hydroelectric energy via submarine cable to mainland Europe and also actively seeks to expand its power-intensive industries, including aluminum and ferro-silicon smelting plants. Nordural Aluminum is a wholly owned investment by Columbia Ventures of Washington State. The plant employs more than 150 people and recently expanded to 90,000 tons per year capacity.
Iceland has no railroads. Organized road building began about 1900 and has greatly expanded in the past decade. The current national road system connecting most of the population centers is largely in the coastal areas and consists of about 13,000 kilometers (8,125 mi.) of roads with about 3,955 kilometers (2,472 mi.) were paved. Regular air and sea service connects Reykjavik with the other main urban centers. The national airline, Icelandair, flies from Iceland to Europe and North America, and is one of the country’s largest employers. Iceland became a full European Free Trade Association member in 1970 and entered into a free trade agreement with the European Community in 1973. Under the agreement on a European Economic Area, effective January 1, 1994, there is basically free cross-border movement of capital, labor, goods, and services between Iceland, Norway, and the EU countries.
GDP: purchasing power parity – $6.85 billion (2000 est.)
GDP – real growth rate: 4.3% (2000 est.)
GDP – per capita: purchasing power parity – $24,800 (2000 est.)
GDP – composition by sector:
agriculture: 15% (includes fishing 13%)
services: 64% (1999 est.)
Inflation rate (consumer prices): 3.5% (2000 est.)
Labor force: 159,000 (2000)
Labor force – by occupation: manufacturing 12.9%, fishing and fish processing 11.8%, construction 10.7%, other services 59.5%, agriculture 5.1% (1999)
Unemployment rate: 2.7% (January 2001)
revenues: $3.5 billion
expenditures: $3.3 billion, including capital expenditures of $467 million (1999)
Industries: fish processing; aluminum smelting, ferrosilicon production, geothermal power; tourism
Industrial production growth rate: 1.5% (2000 est.)
Electricity – production: 7.069 billion kWh (1999)
Electricity – production by source:
fossil fuel: 0.07%
other: 15.29% (1999)
Agriculture – products: potatoes, turnips; cattle, sheep; fish
Exports: $2 billion (f.o.b., 2000)
Exports – commodities: fish and fish products 70%, animal products, aluminum, diatomite and ferrosilicon
Exports – partners: EU 64% (UK 20%, Germany 13%, France 5%, Denmark 5%), US 15%, Japan 5% (1999)
Imports: $2.2 billion (f.o.b., 2000)
Imports – commodities: machinery and equipment, petroleum products; foodstuffs, textiles
Imports – partners: EU 56% (Germany 12%, UK 9%, Denmark 8%, Sweden 6%), US 11%, Norway 10% (1999)
Debt – external: $2.6 billion (1999)
Currency: Icelandic krona (ISK)